Interest Rate Monitor

April 28, 2013

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Brief Overview

February’s Oil Bill Up

International MENA Region

Local Economy

Interest Rate Forecasts

Amman Stock Exchange Local Debt Monitor

Prime Lending Rates

Markets overview

Markets overview

New and analysis

US: Treasury yields lower as 1Q GDP lower than forecast

Eurozone: Germany’s disappointing PMI numbers fuels possibility of rate cuts.

Major Indices: Stocks drop as US GDP figures disappoint

Commodities and Currencies: Major currencies appreciate against the USDCentral Bank Meeting Calendar

Interest Rate Forecast

The Week Ahead

Egypt project 3.8% fiscal year growth, IMF loan in coming weeksGCC News Highlights

GCC interbank rates

Comparative MENA Markets

UK: 1Q GDP beats forecast and avoids triple dip recession

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International

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US Treasury bonds’ yields down on gloomier growth outlook

• US Treasuries rose, pushing 10-year note yields down the most in two weeks, as a report showing the economy expanded less than forecast in the first quarter sustained the refuge appeal of the world’s safest assets.

• USD gross domestic product annualized for the first quarter registered a growth of 2.5%, 0.5% below the estimate of 3.0% by Bloomberg.

• Additionally, the Thomson Reuters/University of Michigan final April index of consumer sentiment declined to 76.4 from 78.6 in March.

21/04/2009 22/04/2009 23/04/2009 24/04/2009 25/04/20091.68%

1.69%

1.70%

1.71%

1.72%

1.73%

1.74%

1.75%

1.72%

1.74%

1.73%

1.74%

1.70%

10-Year Treasury Rate

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Growth in U.S. Trails Forecasts as Defense Spending Falls

• The U.S. economy grew less than forecast in the first quarter as a drop in defense outlays undercut the biggest increase in consumer spending in two years.

• Defense spending dropped at an 11.5 percent annualized pace following a 22.1 percent plunge in the last three months of 2012.

• Gross domestic product rose at a 2.5 percent annualized rate following a 0.4 percent fourth-quarter advance, according to data from the Commerce Department issued in Washington. The median estimate of 86 economists surveyed by Bloomberg called for a 3 percent gain.

• Another report today showed consumer confidence fell in April, signaling that households, which sustained spending last quarter by dipping into savings, may not be able keep shopping at the same pace as tax increases start to pinch.

• The GDP report also showed price pressures remain contained. A measure of inflation tied to consumer spending, the one tracked by Federal Reserve policy makers, rose at a 0.9 percent annualized rate in the first quarter, down from a 1.6 percent gain in the previous three months.

• The lack of inflation means the Fed will probably maintain bond purchases when it meets next week.

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Downward pressure on European bond yields

• The release of purchasing managers’ indexes on the 23rd April showed that the euro zone’s private activity was stagnant in March and Germany’s contracted.

• The weak data pointed to further signs that the European Central Bank, which has so far remained resistant to quantitative-easing measures, could embark on such a plan. The ECB is expected to reduce its main refinancing rate by 25 basis points to 0.5 percent at its next meeting.

• French 10-year yields were 2.6 basis points lower at 1.72 percent after a survey showing France's business downturn eased more than expected in April underpinned its bond prices.

• Bond yields in Italy fell 11 basis points to 3.98% on the 10-year note Tuesday, the first time since November 2010 that they dropped below 4%, due to news that Italian parliaments is on the verge to form a government.

• On the other hand, Spain’s bonds pared their advance after Prime Minister Mariano Rajoy said he would seek two more years to tackle Europe’s widest budget deficit.

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Eurozone struggles to pull out of recession

• Industrial production in Germany, France, Spain and Italy for February was released during the week.

• The German industrial production came out with a 0.5 % month-on-month increase which was better than expected. But the January number was revised down to -0.6% from 0.0% indicating that the economy struggled to recover from the crisis in January.

• France came out 0.7% m-o-m which was better than expected. In Spain and Italy there was a decline in industrial production in February.

• However, Euro-zone industrial production rose 0.4% (seasonally adjusted) in February, beating expectations for a 0.2% rise and up from the revised 0.6% decline in January. Despite the monthly gain, eurozone industrial production was down 3.1% compared with February 2012, the Eurostat statistics service said.

• The Euro-zone has experienced five straight quarters of economic contraction, ending with a 0.6% GDP decline in the fourth quarter. Markit said that based on its PMI surveys, it sees no end to the recession in sight.

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U.K. Avoids Triple Dip Recession

• Britain’s economy avoided a triple- dip recession in the first quarter with expansion that exceeded economists’ forecasts. U.K. gross domestic product grew 0.3 percent in the first quarter. The median forecast of economists in a Bloomberg News survey was for growth of 0.1 percent. The pound surged.

• Services expanded 0.6 percent in the first quarter from the previous three months, boosted by distribution, hotels and restaurants, the statistics office said. Production increased 0.2 percent, led by a 3.2 percent surge in mining and quarrying, while construction shrank 2.5 percent.

• Chancellor of the Exchequer George Osborne said that the data is an encouraging sign that the economy is healing, a week after he defended austerity measures following a call by the International Monetary Fund to relax fiscal tightening.

• The Treasury and Bank of England yesterday extended their credit- boosting program and warned that risks of renewed stresses in bank funding markets remain because of the euro-area crisis.

• The Bank of England is currently focusing stimulus efforts on its Funding for Lending Scheme, which began in August to give banks access to cheaper funding provided they pass on the savings to businesses and consumers.

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US stocks drop as GDP figure disappoints

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Major Currencies & Commodities Appreciated against USD

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Major Interest Rate Forecasts

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The Week Ahead,,,

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The Week Ahead,,,

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Central Bank Meetings Calendar

Expected Rate Decision

Current Rate Month Central Bank

0.25% 0.25% May 1 US Federal Reserve (FOMC)

0.75% 0.75% May 2 European Central Bank (ECB)0.50% 0.50% May 9 Bank of England (BoE)

0.10% 0.10% May 22 Bank of Japan (BOJ)

0.00% 0.00% June 20 Swiss National Bank (SNB)1.00% 1.00% May 29 Bank of Canada (BOC)

3.00% 3.00% May 7 Reserve Bank of Australia (RBA)

2.50% 2.50% June 13 Reserve Bank of New Zealand (RBNZ)

Calendar for upcoming meetings of main central banks :

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Regional

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Egypt sees 3.8% growth in fiscal year from July

• Egypt said its economy will grow by 3.8 percent in the fiscal year starting in July as ministers outlined the 2013/14 budget to parliament on Tuesday.

• The forecast delivered by Planning Minister Ashraf Al-Araby to the upper house of parliament was slightly below his most recent prediction of 4 percent growth next year but well above the 2.5 percent the government expects in 2012/13.

• Finance Minister Al-Mursi Al-Sayed Hejazy detailed proposed tax increases and spending cuts, including plans to save 36.3 billion Egyptian pounds ($5.25 billion) by rationing the distribution of subsidised fuel using smart cards.

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IMF deal in 'coming weeks'

• Talks between the IMF and an Egyptian delegation including Central Bank Governor Hisham Ramez, Finance Minister Morsi Al-Sayed Hegazi and Planning Minister Ashraf Al-Arabi took place over the weekend.

• A statement said that the Egyptian government was "firmly committed to addressing its economic and financial challenges with the objective of restoring sustained and socially balanced growth, and they are already taking encouraging actions in this direction.“

• "WORK will continue with the objective of reaching agreement on an IMF stand-by arrangement to support the authorities' national economic programme in the coming weeks," IMF Managing Director Christine Lagarde and Egyptian finance officials said in a joint statement issued last Sunday.

• Egypt's economy is suffering from a drain of foreign currency reserves and a ballooning budget deficit, and the country is experiencing social unrest due to political instability.

• Observers believe an IMF deal would help shore up investors' confidence in the economy and assure them that the country is serious about adopting economic reforms at the top of which are cutting fuel subsidies and increasing taxes.

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GCC Economic News Highlights

• Minister: UAE GDP to grow 4%: Sultan Bin Saeed Al Mansouri, the UAE Minister of Economy, said that the UAE Gross Domestic Product (GDP) will grow above 4 per cent by the end of this year. The UAE’s solid economic growth is forecast to continue in 2013 despite the global financial crisis and the slow recovery in the developed nations, he said. “The trade, logistics and services will lead the UAE growth,” Al Mansouri said.

• Sukuk issuance to hit USD275bn by 2013-end: The volume of sukuk (Islamic bonds) issued by end of the first quarter of 2013 reached $34.2 billion, increasing on a quarterly based rate at 21.5 percent, after an abundant year that witnessed a 54 percent increase in issuance. Sovereign issuances continue to dominate sukuk issuance, followed by issuances of corporates, then sub-sovereign authorities. The sukuk issuance is expected to reach $275 billion by the end of the year.

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Comparative MENA MarketsFor the period 18/04 – 25/04

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Locally

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Local interest rates forecasts and major developments

• 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; though at a slower pace due to high oil bill & delay of Eurobond issuance till end of 2013.

• Extra grants are also expected amid King Abduallah’s visit to Washington; mainly to help Jordan hosting Syrian refugees.

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Jordan’s oil bill for February Up

• Jordan’s oil bill for the month of February rose to 387.7 million JD in 2013, compared to 334 million JD in 2012, despite international oil prices falling by approximately 10%.

• Factoring in the fact that Brent oil prices fell by 10% between February this year and last year, the oil bill actually increased by 87.1 million JD.

• Comparing Jordan’s oil bill for the first 2 months of this year to last year, we find that oil imports fell by approximately 21% to reach 650.5 million JD from 822.7 million JD in 2012.

• Therefore, we can conclude that the rise in the oil bill for the month of February is a result of unsteady levels of Egyptian gas reaching Jordan, prompting the Jordanian government to resort to oil to meet its electricity needs. Moreover, The increasing number of Syrian refugees have also put upward pressure on Jordan’s oil bill.

• In other news, This week, the Department of Statistics released figures showing that Jordan’s trade deficit decreased by 2.90% during the first 2 months of the year, compared to the same period last year. The decrease in deficit was caused by both a 2.5% rise in exports and a 1.0% fall in imports

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Amman Stock ExchangeFor the period 21/04 - 25/04

ASE free float shares’ price index ended the week at (203.3)

points, compared to (2062.9) points for the last week,

posting a decrease of 1.33%. The total trading volume during

the week reached JD(54.7) million compared to JD(73.6)

million during the last week. Trading a total of (55.7) million

shares through (21,552) transactions

The shares of (184) companies were traded, the shares

prices of (55) companies rose, and the shares prices of (103)

declined.

Top 5 losers for the last week

Stock % chg

International Cards Company (25.45%)

United Arab Investors (20.00%)

Jordan Clothing Company (17.65%)

South Electronics (16.67%)

Jordan Masaken For Land & Industrial Development Projects (16.44%)

Top 5 gainers for the last week

Stock % chg

Arab Real Estate Development 20.00%

Arab Company for Investment Projects 19.23%

Jordanian Expatriates Investment Holding 6.00%

Jordan Kuwait Bank 5.77%

Masafat For Specialized Transport 4.92%

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Local Debt MonitorLatest T-Bills

As April 14, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,726) million.

Yield (%) Size - million Maturity Date Issue Date 3 months T-Bills

2.898% 50 14/03/2012 14/12/2011 29/2011

2.844% 50 12/03/2012 12/12/2011 28/2011

Yield (%) Size - million Maturity Date Issue Date 6 months T-Bills

3.788% 50 14/08/2012 14/02/2012 02/2012

3.433% 50 23/01/2012 23/01/2012 01/2012

3.232% 50 08/06/2012 08/12/2011 27/2011

Yield (%) Size - million Maturity Date Issue Date 9 months T-Bills

4.285% 75 04/12/2012 04/03/2012 05/2012

4.229% 75 29/11/2012 29/02/2012 04/2012

4.169% 75 22/11/2012 22/02/2012 03/2012

Coupon (%) Size - Million Maturity Date Issue Date 1 year T-Bills

6.750% 70 26/02/2014 26/02/2012 03/2013

6.750% 50 14/02/2014 14/02/2012 02/2013

6.750% 70 27/01/2014 27/01/2012 01/2013

6.750% 60 24/12/2013 24/12/2012 22/2012

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Local Debt MonitorLatest T-Bonds Issues

Coupon (%) Size - million Maturity Date Issue Date 2 years T-Bonds

6.039% 50 28/04/2015 28/04/2013 T2613

6.604% 75 10/04/2015 10/04/2013 T2213

6.788% 50 08/04/2015 08/04/2013 T2113

6.950% 50 04/04/2015 04/04/2013 T2013

Coupon (%) Size - million Maturity Date Issue Date 3 years T-Bonds

6.98% 75 17/04/2016 17/04/2013 T2313

7.770% 75 31/03/2016 31/03/2013 T1913

7.958% 75 27/03/2016 27/03/2013 T1813

Coupon (%) Size - million Maturity Date Issue Date 4 year T-Bonds

7.246% 37.5 15/01/2016 15/01/2012 T0312

6.475% 50 16/11/2015 16/11/2011 T4211

Coupon (%) Size - million Maturity Date Issue Date 5 years T-Bonds

7.585% 75 24/4/2018 24/4/2013 T2513

7.750% 75 11/03/2017 11/03/2012 T0712

Coupon (%) Size - million Maturity Date Issue Date Public Utility Bonds

8.134% 26 05/09/2015 05/09/2012 PB55 (Water Authority)

7.966% 20 29/07/2015 29/07/2012 PB005 (Housing & Urban Development)

7.724% 150 26/04/2017 26/04/2012 PBO12 (National Electricity)

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Prime Lending Rates

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