WORLD ECONOMIC & MARKET DEVELOPMENTS
GLOBAL MARKETS: With a narrow margin of 56%, SPD delegates approved at a special conference on Sunday the party’s entrance into formal Grand Coalition talks with Chancellor Angela Merkel’s alliance of Christian parties CDU/CSU. Turning to the other side of the Atlantic, the US government was shut down at midnight on Friday after Senate lawmakers failed to agree on a last-minute deal to extend government funding through mid-February. In order to break the impasse, the Senate agreed to hold a vote at 17:00GMTtoday on a short-term bill. Messy US politics pushed US Treasury yields higher across the curve while the USD was under pressure. EMU periphery sovereign bonds outperformed core euro area sovereign bonds after Fitch upgraded Spain’s credit rating late on Friday to A- from BBB+.
GREECE: The Eurogroup that convenes today is expected to politically endorse the conclusion of the 3rd review of Greece’s 3rd economic adjustment programme in spite of the 21 prior actions that have not yet been fulfilled. The Eurogroup is also expected to approve the disbursement of the next loan tranche, in the area of EUR 6.7 billion which will likely be released in parts. The Greek government is reportedly planning to make a number of changes to Law 3869/2010 (“Katseli” Law) to render it more difficult for strategic defaulters to enjoy the protection of this framework as well as changes to the out-of-court workout framework in order to reduce bureaucracy and make the procedure shorter. The Hellenic Competition Commission has approved the 67% Share Purchase Agreement of the Thessaloniki Port Authority between the Hellenic Republic Asset Development Fund (HRADF) and the preferred investor consortium company South Europe Gateway Thessaloniki Limited. S&P raised its foreign and local currency long-term sovereign credit rating on Greece to ‘B’ from ‘B-’ with outlook ‘positive’ on the grounds that “Greece’s growth and fiscal outlooks have improved alongside a labour market recovery and amid a period of relative policy certainty”.
SOUTH EASTERN EUROPE
BULGARIA: Bulgarian stocks registered modest gains last week, while Eurobonds extended their recent losses and local-currency paper yields dropped.
SERBIA: Albeit kicking off the week on a positive footing, the dinar reversed course amid increased political jitters after the assassination of Serb politician Oliver Ivanovic in Kosovo.
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