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GLOBAL & REGIONAL DAILY (Tuesday, 6 August 2019)

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GLOBAL & REGIONAL DAILY (Tuesday, 6 August 2019)


August 6, 2019

Global markets

Following the negative performance on Wall Street overnight, with US equity indices recording their worst day of the year, Asian stocks extended recent losses on Tuesday after the US Treasury designated China as a “currency manipulator”. Following the PBOC’s move to set the yuan fixing at a firmer-than-expected 6.9683 (vs. market expectations for 6.9871), Asian equity markets pared some losses, while the offshore yuan pulled back to around 7.0650 against the US dollar in European trade on Tuesday, having weakened to a decade low of 7.1400. Elsewhere, the safe haven yen firmed, with the USD/JPY plunging to a seven-month low of 105.520 before retreating modestly to around 106.350 at the time of writing. The 10yr US Treasury yield extended its recent fall overnight and declined to 1.672%, its lowest level since October 2016, as futures markets currently price in 67bps of rate cuts by the Fed through year-end vs. 34bps of cuts priced in roughly a week ago.


According to the General Government data published y-day, the stock of the general government arears to the private sector, including tax arrears, at the end of June 2019 was at €2.2 bn (€1.7 bn excluding tax arrears) almost unchanged on a monthly basis. All categories of the General Government arrears remained unchanged with the exception of hospitals and social security funds’ arrears that registered a monthly increase of 5.4% and a monthly decrease of -1.3% respectively. Compared to their recent peak in August 2017 (€6.0 bn) general government arrears, including tax arrears, registered a decrease of -63.8%. The government, according to Christos Staikouras, the Minister of Finance, is preparing a plan for the full clearance of the arrears.


Bulgaria: The blue chip index SOFIX continued to slide downwards closing -0.7% lower over the past week at 580.08 points, amid volume of €1.9mn. External bond yields dropped across the board, with the longer end of the curve seeing the most significant changes – 2027 and 2028 tenors dropped by 5 and 9 bps respectively, while the 2035 papers dropped by 5 bps. Local papers remained largely unchanged over the week, with 2-3 bps changes across all maturities. The Ministry of Finance reopened the 10 year bonds with an auction held on July 29th, and successfully placed an additional €100mn bringing the total amount of new bond issues for the year at €350mn.

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