Slide 1

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 2

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 3

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



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conducted in connection with this report.

42


Slide 4

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 5

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



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conducted in connection with this report.

42


Slide 6

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 7

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
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discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
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

All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
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

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shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



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conducted in connection with this report.

42


Slide 8

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 9

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 10

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


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conducted in connection with this report.

42


Slide 11

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 12

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 13

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer
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42


Slide 14

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 15

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 16

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 17

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 18

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 19

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



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

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42


Slide 20

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 21

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 22

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
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

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conducted in connection with this report.

42


Slide 23

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 24

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



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

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conducted in connection with this report.

42


Slide 25

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
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conducted in connection with this report.

42


Slide 26

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


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

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conducted in connection with this report.

42


Slide 27

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 28

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 29

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


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42


Slide 30

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 31

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 32

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

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42


Slide 33

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 34

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 35

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
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

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The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
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42


Slide 36

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 37

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 38

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



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opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



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42


Slide 39

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 40

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.



The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers,
directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities
conducted in connection with this report.

42


Slide 41

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the
materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole
discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its
materials described in the report at any time without notice.



The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty,
express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other
investment and\or to be relied on for any act whatsoever.



Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken
in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any
evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman
Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.



All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and
opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.



Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer
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

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conducted in connection with this report.

42


Slide 42

Interest Rate Monitor
April 7, 2013

Brief Overview
International
US: Signs of moderation in growth
Eurozone: ECB keeps rates unchanged but holds

the door open for further easing

MENA Region
Egypt: IMF loan talks back on the table
GCC News Highlights

UK: BoE maintains QE amid strengthened service
activity

GCC interbank rates

Japan:
New BoJ governor Haruhiko Kuroda
definitely left his mark this week

Comparative MENA Markets

China: Signs of moderate recovery

Markets overview

Local Economy
New and analysis

Major Indices: Stocks sell-off amid weak US jobs report

 Interest Rate Forecasts

Commodities and Currencies: Yen extends slide against
dollar

 2012 GDP reached 2.7%; reports show that
FX reserves to end April at $9 bn

Central Bank Meeting Calendar

Markets overview

Interest Rate Forecast
The Week Ahead

 Amman Stock Exchange
 Local Debt Monitor
 Prime Lending Rates

2

International

3

US Treasury bond rates
•

•

US jobs data heightened the sense of unease in the
market. This combined with continued weak
indicators from the eurozone fueled demand for
safe havens, particularly US Treasuries.
The yield on the 10-year US Treasury was down
8bp at 1.70%, the lowest since December and 14bp
down over the week.

As of April 6
1 Month
3 Months
6 Months
2 Years
5 Years
10 Years
30 Years

0.05%
0.07%
0.10%
0.25%
0.69%
1.71%
2.88%

1 Week Ago A Month Ago
0.04%
0.07%
0.11%
0.25%
0.77%
1.85%
3.10%

0.09%
0.10%
0.12%
0.25%
0.80%
1.94%
3.15%

4

Job Market Remains a Wild Card in Recovery Picture
•

As the U.S. economy picks up steam, the job market
remains a question mark.

•

Hiring slowed sharply in March, with the economy adding
only 88,000 jobs, the lowest monthly gain since last June
and keeping the economic recovery from shifting to a
higher gear despite a mending housing market and
steady consumer and business spending.

•

The grim report, out Friday from the Labor Department,
was a stark pullback from February's upwardly revised
268,000 gain.

•

The unemployment rate, which is derived from a
different survey than the payroll numbers, fell to 7.6%, a
four-year low, from 7.7%. Economists expected nonfarm
payrolls to rise by 200,000.

•

The decline in the unemployment rate wasn't the result
of more people getting jobs, but, rather, almost 500,000
individuals leaving the work force because of layoffs as
well as retirement and other reasons.

March
88,000

5

Job Market Remains a Wild Card in Recovery Picture
•

Markets tumbled on the reports, with the Dow Jones Industrial
Average sliding more than 100 points at around midday Friday.
The Nasdaq and the S&P 500 both fell, while investors flocked to
10-year U.S. Treasury bonds.

•

Overall, the March employment report was weak. Job growth is
now back to 168k on a three-month average, which is far from
the Fed’s ‘substantial improvement’ and talks of scaling down
the QE program will take a pause.

•

One Fed official this week raised the possibility of a job market
strong enough by summer to begin pulling back from the
program, but the March picture could raise doubts inside the
central bank about how quickly the job market is healing and
deflate that hope.

•

The March reading stirred some fears of yet another year
starting strong and wilting in the spring.

•

Analysts cautioned against reading too much into the numbers,
which will be revised and reflect only one month's performance.
They also cited possible factors behind March's stumble, such as
budget turmoil in Washington and unseasonably cold weather.

March
7.6%

6

US economy looks to hit a soft patch in Q2, amid tentative
signs of slowdown
•

Both the manufacturing and non-manufacturing ISM surveys declined in March,
suggesting that economic growth cooled off at the end of Q1.

•

The drop in the ISM manufacturing survey was driven by a sharp decline in
domestic orders, while new export orders managed to increase. This suggests
that the weakness is primarily domestic, most probably driven by this year’s
significant fiscal tightening.

•

U.S. manufacturers notched a fourth consecutive month of expansion in March,
continuing to grow but at a slower pace, with the auto and housing sectors
leading the gains.

•

Details of Monday's report from the Institute for Supply Management showed
March’s 51.3 level of overall manufacturing activity was down from 54.2 in
February. Readings above 50 indicate expansion.

•

The non-manufacturing ISM fell short of expectations, dropping to 54.4 last
month from 56.0.

•

The report is too early to reflect fallout from the $85 billion in federal spending
cuts known as the sequester, which was triggered early in March.

7

Downward pressure on European bond yields
•

A combination of aggressive easing from the
BoJ, which included an extension of the
maturity on its government bond purchases,
and the dovish tone in Draghi’s comments at
the ECB press conference put downward
pressure on yields.

•

European government bonds were pushing to
their strongest levels on record Friday as
investors shifted out of Japan and into higheryielding bonds.

•

Yields on both French and Belgian bonds
maturing in 10 years hit record lows, while
Italian government bond yields also fell to their
lowest levels since February's inconclusive
election.

•

Moreover, unease following weak US payroll
data also helped to push investors towards safe
havens such as German 10-year bonds. The
Bund yield touched an eight-month low, ending
down 3bp on the day and 8bp on the week at
1.21%.

8

ECB keeps rates unchanged but holds the door open
for further easing
•

In a big week for central banks, the European Central Bank
left interest rates unchanged but appeared to leave the door
open for a cut in coming months as president Mario Draghi
acknowledged downside risks to an anticipated recovery in
the eurozone in the second half

•

Draghi said the central bank still believes the European
economy will turn around later this year, even though he
admitted that economic weakness is spreading to the
stronger countries in the eurozone.

•

The European recession has worsened recently, with
unemployment hitting another record high 12% in February.
But the ECB has not cut rates since July, when it lowered the
benchmark rate to 0.75%.

•

Draghi signaled that the ECB is reluctant to take innovative
measures to revive output and employment, but opened the
door to an interest-rate cut if the eurozone's flagging
economic-growth prospects fail to improve.

•

"We will assess all incoming information in the coming weeks
and we stand ready to act," Mr. Draghi said after the ECB
voted to hold its main policy rate.

9

ECB seems to be running out of policy options
•

With inflation below the ECB's 2% target at 1.7%, and
expected to decline further, and eurozone GDP on track to
have contracted for a sixth straight time in the latest
quarter, the ECB has room to cut rates.

•

Though the ECB prefers non-standard measures, which can
be targeted at the countries where the monetary
mechanism remains broken and where stimulus is much
needed.

•

The ECB's problem isn't that interest rates are too high.
Rather, it is that the central bank's policies aren't
transmitting uniformly across the 17-member currency
bloc.

•

Spanish and Italian small businesses pay significantly higher
interest rates for loans than comparable German
companies, in a sign of the eurozone's continuing financial
fragmentation.

•

Mr. Draghi said, as he did in March, that ECB officials are
studying the fragmentation issue from "360 degrees." But
he repeatedly highlighted limitations to what the ECB can
do. "The ECB cannot replace governments' lack of action on
structural reforms" to spur growth, he said.

10

ECB seems to be running out of policy options
•

The ECB's remaining policy options—interest rate cuts,
bank-lending measures and asset purchases—may not
do much to stimulate economic growth.

•

Since late 2011, the ECB has reduced interest rates three
times, pumped more than €1 trillion ($1.28 trillion) in
three-year loans into banks and created the new bondpurchase program, yet GDP has contracted the entire
time.

•

Though, Draghi argued that the steps taken by the ECB
have already helped support the European economies.
Specifically, he pointed to the drop in bond yields in
many troubled countries in response to ECB bond
purchases known as Outright Monetary Transactions, or
OMTs.

•

Also, the bond program, he said, has prevented financial
turbulence in places such as Cyprus from turning into an
"existential" crisis.

11

Eurozone struggles to pull out of recession
•

Activity in the eurozone's private sector fell at a sharper pace in
March, according to surveys of purchasing managers, leaving the
currency area on course for its sixth straight quarter of economic
contraction.

•

While the first quarter contraction is likely to have been less steep
than the 0.6% decline seen in the final quarter of last year, the
concern is that the eurozone downturn shows no signs of ending.

•

Markit Economics Thursday said its composite Purchasing
managers' index — which measures activity in both the
manufacturing and services sectors — fell to 46.5 from 47.9 in
February, and was in line with the flash estimate released last
month.

•

A reading below 50 indicates that activity has fallen. According to
the composite PMI, activity has now fallen in each of the last 19
months, with the exception of one month of modest expansion at
the start of 2012.

•

According to the PMI, France was the weakest of the major
eurozone economies, with private-sector activity falling to a 48month low. But even Germany edged closer to contraction, with
its composite PMI at 50.6, a three-month low.

12

Eurozone struggles to pull out of recession
•

Retail sales fell in the 17 countries that use the euro in February,
underscoring the weakness in consumer demand that threatens to delay
an economic recovery that leaders hope to see this year.

•

Eurostat, the European Union's official statistics agency, said Friday that
retail sales in February fell 0.3% on the month and by 1.4% on the year.
February's month-on-month fall partly reversed a rise of 0.9% in
January.

•

Sales have been falling year-on-year for 18 consecutive months, a
Eurostat spokesman said, although February's drop was the least severe
since last August.
Consumer spending isn't likely to support growth in the eurozone's
recession-hit economy for some time.

•

•

On the other hand, German manufacturing orders rose more than
expected in February, rebounding after a disappointing January and
signaling that the slowdown in the economy could be short-lived, data
from the Economics Ministry showed Friday.

•

German manufacturing orders in February increased 2.3% on the month
amid strong demand both inside and outside the country, reversing
January's upwardly revised 1.6% drop, and beating analysts'
expectations for a 1.2% rise. The volume of big-ticket orders was slightly
below average.

13

IMF agrees on Cyprus deal ,,,
•

On Wednesday, the IMF said it had reached a staff level, or initial, agreement with Cyprus to unlock its
portion—about €1 billion—of a €10 billion bailout for the country, with formal approval expected in
early May.

•

After two attempts at securing a bailout deal in March that pushed Cyprus to the brink of exiting the
euro, the country faces major obstacles. To secure the aid, it agreed to wind down its second-largest
lender, Cyprus Popular Bank PCL, and radically restructure the largest, Bank of Cyprus PCL.

•

The banking-sector overhauls are only one part of Cyprus's deal with creditors; the other part is
designed to narrow the country's budget gap.

•

Cyprus needs to push through spending cuts equal to 4.5% of GDP by 2018 to hit a primary surplus—
the government operating surplus before taking into account debt payments—of 4% of GDP. These cuts
will come on top of savings equal to 5% of GDP that the government is implementing through 2015.

•

Tax increases equal to another 2% of GDP are included in program, including an increase in the
country's corporate tax rate to 12.5% from 10%, and raising the tax on interest income to 30% from
15%, among other measures.

•

Cyprus's corporate tax rate will remain among the lowest in Europe, on an equal footing with Ireland's,
and will allow Cyprus to continue to use its tax regime to attract businesses. But the increase in
withholding tax will make it a less-attractive place for depositors.

14

BoE maintains quantitative easing
•

Bank of England policy makers decided against injecting
more stimulus into the U.K. economy on Thursday, despite
having received a new mandate that gives them more room
to disregard high inflation and pursue faster economic
growth.

•

The U.K. economy has flat-lined since the middle of 2010,
with the government committed to a tight fiscal policy until
the 2015 election, and beyond if it holds on to power.

•

But Treasury chief George Osborne in March handed the
central bank a new remit giving officials more leeway to
tolerate an inflation rate above 2.0% if the economy needs
extra support.

•

Economists believe it likely that policy makers will take
advantage of their greater freedom to provide more
stimulus, but possibly not before Bank of Canada Governor
Mark Carney takes over in July.

•

The central bank's rate-setting Monetary Policy Committee
kept its benchmark interest rate at 0.5%, where it has been
since March 2009, and the size of its bond-buying
quantitative easing program at £375 billion following its
two-day policy meeting.

15

UK services unexpectedly strengthened in March, easing
concerns of a triple-dip recession
•

A survey published earlier Thursday by financial
information firm Markit and the Chartered Institute of
Purchasing and Supply showed activity in the U.K.'s
dominant services sector expanded in March at its fastest
pace in seven months, buoyed by new orders and rising
business confidence.

•

The headline Business Activity Index registered 52.4 in
March, up from February’s 51.8.

•

The gathering upturn in services last month, have helped
the UK to narrowly avoid a triple-dip recession, after
disappointing surveys for the smaller manufacturing and
construction.

•

Markit said its three indexes point to economic growth of
just 0.1% in the first quarter. The official GDP data is due on
April 25.

•

But economists said the improvement doesn't change the
underlying picture of an economy that appears stuck firmly
in neutral.

16

Bank of Japan takes decisive step, doubles quantitative
easing
•

The new Bank of Japan (BoJ) governor Haruhiko Kuroda, at
his inaugural policy board meeting, definitely left his mark in
connection with this week’s monetary meeting, pulling out
all the stops to get the economy out of deflation.

•

The central bank rolled out aggressive easing measures that
surprised markets, pushing bond yields to an all-time low
and boosting share prices.

•

The BoJ will aim to double the monetary base to ¥190 trillion
($1.97 trillion) over two years through the aggressive
purchase of long-term bonds. That will raise the average
remaining maturity of its holdings from about three years to
seven years, keeping downward pressure on yields all along
the curve.

•

The BOJ's decision crushed yields on Japanese debt to record
lows, forcing asset managers and insurance companies to
look to Europe for bonds with higher returns that are
perceived to be relatively secure. BoJ’s aggressive move has
put downward pressure on global bond yields.

•

Japanese government bonds yields fell sharply after the
announcement, with the benchmark 10-year yield hitting an
all-time low of 0.425%, though later traded higher.

17

Bank of Japan takes decisive step, doubles quantitative
easing
•

Specifically, BoJ announced that it will return to its QE
regime from 2002-2006 and target the monetary base,
which it intends to close to double by end-2014. In
addition, government bond purchases were increased and
BoJ signalled that the aggressive pace of government bond
purchases of now more than 10% of GDP will be continued
next year. Finally, the maturities of BoJ’s government bond
purchases were also increased.

•

Under the new measures, the BoJ will expand its balance
sheet by around 1% of GDP each month. By comparison,
the US Federal Reserve’s current monetary easing
programme involves increasing the balance sheet by
0.54% of GDP per month.

•

Recent data in Japan have disappointed slightly. Industrial
production for February surprisingly dropped 0.1% m/m,
suggesting that the recovery in manufacturing activity has
started to lose steam. However, the JMMA/Markit
manufacturing PMI in March again improved markedly to
50.5 from 48.5 in February and new orders surged from
48.8 to 52.8 – the highest level since August 2011.

18

China faces moderate recovery
•

China’s manufacturing sector expanded at its fastest pace in
almost a year in March, but the rise was slower than most
economists had predicted. This suggests that China’s economy
may not rebound as quickly as many had hoped.

•

In China the NBS manufacturing PMI in March improved only
slightly to 50.9 from 50.1 in February. The improvement was not
particularly impressive, if we take into account that the NBS
manufacturing PMI tends to improve in March even though the
data are seasonally adjusted.

•

The HSBC manufacturing PMI in its final reading improved to
51.6 in March from 50.4 in February, partly driven by
normalization after the distortions from the Chinese New Year.

•

Overall the manufacturing PMIs suggest that industrial
production picked up pace in the first quarter of 2013 compared
to the previous one.

•

Nevertheless, China’s central bankers have said that they are
worried about a potential rebound in inflation later this year that
could force them to tighten monetary policy, which could in turn
stall the mild recovery currently under way.

19

US stocks see selloff at the heels of an employment report
that widely missed expectations

20

Yen extends slide against the dollar after BoJ aggressive
easing

21

Major Interest Rate Forecasts

Rate (%)

Market yield
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q2 2014
(April 6)

United States
US 10-year

1.71

1.96

2.12

2.29

2.46

2.62

2.66

Fed Fund Target Rate

0.25

0.25

0.25

0.25

0.25

0.25

0.25

1.21

1.58

1.74

1.88

1.97

2.09

0.75

0.75

0.75

0.75

0.75

0.75

0.75

1.63
0.50

2.03
0.50

2.16
0.50

2.30
0.50

2.38
0.50

2.50
0.50

2.00
0.50

Germany
Germnay 10-year
ECB Main Refinancing Rate
United Kingdom
UK 10-year
BoE Bank Rate
Source: Bloomberg

22

The Week Ahead,,,
Economic Data Release Calendar
April 7, 2013 - April 12, 2013
Date

7-Apr Sun
8-Apr Mon

9-Apr Tue

10-Apr Wed

11-Apr Thu

12-Apr Fri

Currency / Event

JPY Current Account Total (Yen)
JPY Trade Balance - BOP Basis (Yen)
EUR German Industrial Production n.s.a. and w.d.a. (YoY)
GBP RICS House Price Balance
USD Fed's Bernanke Speaks at Atlanta Fed Conference in Georgia
CNY Consumer Price Index (YoY)
EUR German Trade Balance (euros)
JPY Machine Tool Orders (YoY)
GBP Industrial Production (YoY)
GBP Total Trade Balance (Pounds)
USD NFIB Small Business Optimism
GBP NIESR Gross Domestic Product Estimate
CNY Trade Balance (USD)
CNY Exports (YoY)
CNY Imports (YoY)
CNY New Yuan Loans
USD Fed Releases Minutes from Mar 19-20 FOMC Meeting
JPY Machine Orders (YoY)
AUD Unemployment Rate
Eurogroup meeting
EUR German Consumer Price Index (YoY)
EUR Euro-Zone Industrial Production w.d.a. (YoY)
USD Advance Retail Sales
USD Retail Sales Ex Auto & Gas
USD Producer Price Index (YoY)
USD U. of Michigan Confidence

GMT

23:50
23:50
10:00
23:01
23:15
01:30
06:00
06:00
08:30
08:30
11:30
14:00

Forecast

-1.10%

2.50%

$15.30B
11.70%
5.80%
18:00
23:50
01:30
06:00
09:00
12:30
12:30
12:30
13:55

Previous

-¥364.8B
-¥1479.3B
-1.30%
-6.00%
3.20%
13.7B
-21.50%
-2.90%
-£2362
90.80
-0.10%
$15.25B
21.80%
-15.20%
620.0B

-7.60%

-9.70%
5.40%

-2.50%
0.00%

-1.30%
1.10%
0.40%
1.70%

23

Central Bank Meetings Calendar
Calendar for upcoming meetings of main central banks :
Current
Rate

Expected Rate
Decision

May 1

0.25%

0.25%

European Central Bank (ECB)

May 2

0.75%

0.75%

Bank of England (BoE)

May 9

0.50%

0.50%

Bank of Japan (BOJ)

April 26

0.10%

0.10%

Swiss National Bank (SNB)

June 20

0.00%

0.00%

Bank of Canada (BOC)

April 17

1.00%

1.00%

Reserve Bank of Australia (RBA)

May 7

3.00%

3.00%

Reserve Bank of New Zealand (RBNZ)

April 23

2.50%

2.50%

Central Bank

Month

US Federal Reserve (FOMC)

24

Regional

25

Egypt: IMF Loan Back on The Table
•

After initial talks between Egypt and the IMF fell through due to
disagreements on the conditions of the loan, the Egyptian government
now has a "newly amended national financial and socio-economic
reform program that will be presented to the IMF," Ashraf al-Arabi,
Egypt's planning and international cooperation minister said, adding
that he was positive his country would reach a "staff level agreement
with the IMF regarding the loan," based on that plan.

•

Part of the intended economic reforms that Egypt plans to enforce
include smart cards to ration fuel subsidies. The country also plans to
reduce its budget deficit from 10.8% of GDP, to 9.4% in 2014 and 8.5%
in 2015.

•

Additionally, the Egyptian government plans on boosting its foreign
reserves back to $16bn by end of June of this year, after it reached
$13.5bn, less than the recommended 3 months of imports by the IMF.

•

Nevertheless, the size of the IMF loan to Egypt may change depending
on the assessment of the country's modified economic plan. Last
Tuesday, Masood Ahmed, head of the IMF’s Middle East departments
said “depending on Egypt's needs and the assessment of our team that
will be in Egypt tomorrow to hold talks with Egyptian officials, the
amount of the loan may vary, less or more.“

Source: The Economist

26

Central Bank of Egypt Reintroduces Deposit Operations
•

In a move aimed at absorbing liquidity and containing
inflation, the Central Bank of Egypt (CBE) reintroduced deposit
operations starting on Tuesday. According to the new system,
deposits with the Central Bank will have a seven-day maturity
with a fixed annual interest rate of 10.25%.

•

According to analysts, the CBE had apparently observed the
build-up of excess liquidity at the banks and that the new step
aimed at absorbing this liquidity to maintain high interest
rates and curb inflation.

•

The CBE deposit facility offers a rate that is higher than the
overnight corridor deposit rate by 0.5%, "probably to ensure
that the minimum return on assets in the banking system is
10.25%, which allows banks to raise deposit rates without
compromising the return on equity,“ according to one bank.

•

In other news, Egypt’s pound is weakening in unregulated
trading as the shortage of U.S. dollars prompts buyers to pay a
premium of as much as 17%, according to three money
exchangers in Cairo. The local currency’s drop is accelerating
as the central bank reduces the supply of dollars to pay for
Egypt’s essential imports amid dwindling foreign reserves. The
rates ranged between 7.7 pounds and 7.95 a dollar, trading a
figure above market rates.

Source: Bloomberg

Source: Bloomberg

27

GCC Economic News Highlights
•

Bahrain economy - economic growth disappoints in 2012: Although
substantially better than the 1.9% growth rate the economy recorded in
2011, the Central Informatics Organisation (CIO) has revealed that
Bahraini real GDP growth reached 3.4% last year below expectations, after
a weak fourth quarter and a substantial downward revision to its growth
figures for the first half of the year.

•

The underperformance of the economy can largely be blamed on the oil
sector and the continued impact of ongoing social unrest.

•

Analysts expect real GDP growth to remain broadly stable in 2013, at
3.6%, in the wake of a continued slow recovery in the financial services
sector and on the assumption that oil output will stabilise.

•

Qatar's international reserves scale up to $36bn in February: Favorable
energy prices, relatively higher production and prudent fiscal management
have seen Qatar's international reserves scale up to $36bn in February
compared with $33bn in end-2012.

•

Preliminary full-year GDP data for 2012 released at the end of March
showed Qatar's real GDP grew 6.2%. The non-oil and gas sector was the
main driver of growth in 2012, expanding by 10%. The share of the sector
in the overall economy increased to 42.2% in 2012 from 40.7% in 2011.
Growth in the oil and gas sector was just 1.7%.

28

GCC Economic News Highlights
•

Qatar Central Bank details local currency bond issue plan: Qatar's central
bank plans to issue 3bn riyals ($825m) of conventional bonds and 1bn riyals
of sukuk in the local currency every quarter, its central bank governor said
on Tuesday.

•

"We want to manage our liquidity, enhance our yield curve, deepen our
capital market and create a benchmark for our companies to issue bonds.“
said the governor.

•

Expected durations are 3 and 5 years, with yields of 2.75% and 3.00%
respectively.

•

UAE Non-Oil Economy Remains Robust but Activity Slowed in March –
HSBC: The U.A.E.'s non-oil economy remains in robust shape, but its rate of
expansion slowed slightly in March, compared with the month before, as
new order growth moderated.

•

The bank's purchasing managers index, or PMI, dropped to 54.3 in March,
from 55.4 in February. A reading above the neutral 50 level indicates the
economy is expanding.

•

HSBC said the rate of new order growth fell for the third successive month in
March, but still remained solid. New export business meanwhile rose for the
thirty-fourth consecutive survey period, but at the slowest pace since last
July.

29

GCC new highlights
OPEC says oil price level not harmful to world economy
•

The current level of oil prices is not harmful to the global economy
and on the contrary supports energy investments, the secretary
general of oil exporting group OPEC said on Thursday. Oil prices
have averaged about $110 per barrel this year.

•

After early signs of stabilization in the world economy, the last
month has seen a series of setbacks with U.S. and European
recovery stuttering.

•

"We believe current price levels are supportive of the energy future
we portray, and will not harm the global economy," OPEC Secretary
General Abdallah Al-Badri told an oil conference in Paris. "The oil
price as we see it now is comfortable for producers and consumers."

•

OPEC crude oil output is on course to reach its lowest since October
2011 this month as unrest in Libya, pipeline leaks in Nigeria and
Iraqi export disruptions weigh on supplies, a Reuters survey found
last week.

•

The survey indicated top OPEC exporter Saudi Arabia was still
keeping a lid on output.

•

OPEC is scheduled to meet on May 31 in Vienna to review its output
policy for the second half of the year.

30

GCC interbank rates

Source: Bloomberg

31

Comparative MENA Markets
For the period 31/03 – 05/04

32

Locally

33

Local interest rates forecasts and major developments
Rate (%)
Jordan
2-year Treasury

Market yield
(April 7)

Q2 2013

Q3 2013

Q4 2013

6.79

7.25

7.50

7.75

Previous forecast

Window Rate

7.95

4.00

7.55

4.00

7.75

4.00

8.00

4.00

Source: CAB forecasts

•

Excess liquidity has continued its upward
trend, while the reversal trend from
Dollar to Dinar has intensified.

•

Easing pressures on the external sector is
anticipated to continue as Jordan is
expected to receive USD 585 million in
grants and loans this month.

•

No benchmark interest rates hikes are
expected in 2013.

34

Jordan’s economic growth slows down in 4Q12
•

•

Economic growth moderated to 2.2% YoY in in the fourth
quarter of 2012, compared to 2.6% the previous quarter
according to data from the statistical office.
The GDP annual growth rate reached 2.7% for 2012, compared
to 2.6% the previous year, below forecasts of 3% growth.

•

The government expects the economy to expand 3.3% in 2013,
driven by higher government spending, increasing local
consumption and an improvement in exports.

•

Most sectors have shown positive growth during the fourth
quarter of 2012 compared with the fourth quarter of 2011:
–
–
–
–
–
–
–

Social services sector grew the most by 9.80%
Wholesale, retail, hotels, and restaurants sector grew by
5.90%
Financial, insurance, real estate, and business services
sector grew by 5.50%
Electricity and water sector grew by 5.30%
Construction industry contracted by 4.10%
Agriculture sector contracted by 8.80%
Extractive industries sector contracted by 25.20%

35

FX reserves to surpass $ 9 billion,,,
•

Foreign reserve levels are expected to reach the highest
level since last year at $9 billion, an increase of $2.30
billion during the first 4 months of the year.

•

Currently, foreign reserve level stand at $8.4 billion and
the expected increase is driven by:
–

–
–

Foreign loans and grants to be received from the U.S
and the IMF this month in the amount of $200
million and $385 million, respectively.
A slowdown and reversal of the dollarization wave
observed last year.
Jordan’s oil bill falling by 44% at the end of January
of this year to reach $403 million, compared to $720
million for the same period last year.

•

Equally, excess JD liquidity in the banking system is
expected to surpass JD2.6 billion due to the increase in
government’s dependence on external funding.

•

Higher excess JD liquidity and foreign reserves will keep
downward pressure on JOD interest rates.

36

Interest Rates up in February, expected to stabilize in
coming months
•

Since the beginning of the year, the weighted average interest rate at banks in Jordan has been increasing,
reaching 5.27% in February, while prime lending rates also climbed up reaching 8.87% for the same period.

•

We believe that the upward trend will subdue, but with a time lag, as debt instruments interest rates
continue to fall. Yields on 2- and 3-year government bonds have fallen by approximately 1.00% since the end
of February.

37

Amman Stock Exchange
For the period 31/03 – 04/04
ASE free float shares’ price index ended the week at (2119.1)
points, compared to (2088.9) points for the last week,
posting an increase of 1.45%. The total trading volume
during the week reached JD(639.2) million compared to
JD(92.2) million during the last week. Trading a total of
(207.4) million shares through (48,778) transactions
The shares of (187) companies were traded, the shares
prices of (105) companies rose, and the shares prices of (58)
declined.
Top 5 losers for the last week

Top 5 gainers for the last week
Stock

% chg

Stock

% chg

Aldaman For Investments P.l.c

61.54%

Darat Jordan Holdings

(18.00%)

Jordan Steel

25.87%

Rum Aladdin Industries

(13.08%)

Arab Financial Investment

25.42%

Jordanian Realestate Company For Development

(12.66%)

Int'l Arabian Development And Investment Trading Co.

23.61%

Cairo Amman Bank

(9.29%)

National Steel Industry

22.73%

Jordanian Duty Free Shops

(8.70%)

38

Local Debt Monitor
Latest T-Bills


As April 7, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,599)
million.

3 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

29/2011

14/12/2011

14/03/2012

50

2.898%

28/2011

12/12/2011

12/03/2012

50

2.844%

6 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

02/2012

14/02/2012

14/08/2012

50

3.788%

01/2012

23/01/2012

23/01/2012

50

3.433%

27/2011

08/12/2011

08/06/2012

50

3.232%

9 months T-Bills

Issue Date

Maturity Date

Size - million

Yield (%)

05/2012

04/03/2012

04/12/2012

75

4.285%

04/2012

29/02/2012

29/11/2012

75

4.229%

03/2012

22/02/2012

22/11/2012

75

4.169%

1 year T-Bills

Issue Date

Maturity Date

Size - Million

Coupon (%)

03/2013

26/02/2012

26/02/2014

70

6.750%

02/2013

14/02/2012

14/02/2014

50

6.750%

01/2013

27/01/2012

27/01/2014

70

6.750%

22/2012

24/12/2012

24/12/2013

60

6.750%

39

Local Debt Monitor
Latest T-Bonds Issues
2 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T2013

04/04/2013

04/04/2015

50

6.950%

T0813

18/02/2013

18/02/2015

80

7.950%

T0513

05/02/2013

05/02/2015

60

7.950%

3 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T1913

31/03/2013

31/03/2016

75

7.770%

T1813

27/03/2013

27/03/2016

75

7.958%

T1713

25/03/2013

25/03/2016

75

8.163%

4 year T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0312

15/01/2012

15/01/2016

37.5

7.246%

T4211

16/11/2011

16/11/2015

50

6.475%

5 years T-Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

T0712

11/03/2012

11/03/2017

75

7.750%

T0412

19/01/2012

19/01/2017

50

7.489%

Public Utility Bonds

Issue Date

Maturity Date

Size - million

Coupon (%)

PB55 (Water Authority)

05/09/2012

05/09/2015

26

8.134%

PB005 (Housing & Urban Development)

29/07/2012

29/07/2015

20

7.966%

PBO12 (National Electricity)

26/04/2012

26/04/2017

150

7.724%

40

Prime Lending Rates

41

Disclaimer


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materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any
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materials described in the report at any time without notice.



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express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not
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

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42