Financial Markets…The euro gained 0.4% against the dollar, rising to $1.3110 today, its strongest level in six weeks, as falling funding costs at Italian and Spanish government bond auctions added signs that the region’s debt crisis is subsiding.

The 17-nation currency remained strong versus the yen at 130.45, after reaching a three-year high of 130.83.

South Korean’s government bonds fell on Thursday, prompting the steepest decline in 5-year yields since May 2009, after Bank of Korea unexpectedly left its key interest rate unchanged at 2.75%. The yield on government securities due in May 2018 widened 20 basis points to 2.78%.

Borrowing costs in many developing countries fell to record lows as the Bank of Japan’s aggressive monetary easing plans boosted demand for higher-yielding assets. The 10-year government bond yields in Mexico, Czech Republic, Poland, and South Africa dropped to all-time lows, and comparable yields on South Korea and the Philippines fell to historic lows as well in the past month.

Developing Economies…East Asia and Pacific: Malaysia’s industrial production declined in February by 4.5% (y/y), down from revised growth of 5.2% (y/y) in the previous month. The declines were led by contraction in manufacturing (-5.2% y/y) as well as electricity production and mining (-3% y/y each).

High-income Economies…US initial jobless claims fell to 346,000, a decrease of 42,000 from the previous week’s revised figure of 388,000, suggesting that the recent weakness in March was likely temporary. The number of people receiving ongoing unemployment assistance, dipped to 3.079 million in the week ended March 30th from the preceding week’s revised level of 3.091 million.

Cyprus’ bailout cost is estimated to have ballooned to 23 billion euros – larger than the size of the economy – from an initially estimated 17 billion euros. The extra cost is expected to be met by Cyprus through heavy losses on large bank deposits, levying additional taxes, privatizations and a part-sale of central bank gold reserves.

Greece saw deposit inflows of more than 1.5 billion euros in March, despite fears the Cypriot banking crisis would spark outflows in other troubled euro zone economies. More than 19 billion euros have returned to Greece since mid-June last year as fears of a disorderly Greek euro zone exit receded, but that is still a fraction of the 90 billion that fled during the debt crisis. Separately, the unemployment rate jumped to a new record of 27.2% (sa) in January from 25.7% in December.

 

Europe and Central Asia: Serbia will receive a 10-year $500mn loan from Russia with $300mn available immediately, while the remaining $200mn will be available once Serbia has agreed a new precautionary loan deal with the IMF. The latest deal follows a five-year, $800mn loan signed between Russia and Serbia in January 2013.

Latin America and the Caribbean: Brazil’s retail sales contracted in February by 0.2% (y/y), sharply down from a growth of 5.9% (y/y) in the previous month.

Mexico’s industrial production declined 1.2% (y/y) in February, reversing the 1.7 percent gain seen in January with all sub-sectors recording negative growth, led by declines in construction (2.3% y/y) and manufacturing (0.9% y/y).

Middle East and North Africa: Egypt will receive a new $3bn financial aid package from Qatar either in form of a deposit with Egypt’s central bank or purchases of government bonds. Egyptian government has been trying to secure a $4.8bn loan from the International Monetary Fund. The loan would unlock budget support and aid from other countries and international organizations.

Sub-Saharan Africa: South Africa’s manufacturing output fell 2.9% (y/y) in February as stagnant domestic and global growth curbed demand, offsetting the benefits of a weaker rand. Output declined from revised growth of 3.7% (y/y) in

Original post:
Prospects Daily: Developing country bond yields drop, Cyprus bailout costs rise, Industrial production falls in Malaysia, Mexico and South Africa