67266 DECPG Daily Economics and Financial Market Commentary January 30, 2012 Allen Dennis, Eung Ju Kim, Mick Riordan, Cristina Savescu, Nadia Spivak You’ll find recent issues of this Daily and lots of other current analysis and high-frequency data at our intranet website: http://gem or for external users http://www.worldbank.org/gem. U.S. treasury yields hit record low on European debt concern. Treasury prices moved higher on Monday, pushing the intra-day yield on five-year note to a record low, as growing concern over European debt crisis boosted demand for the safe-haven assets. Investors are warily watching developments in European debt situation as European Union leaders meet in Brussels today for the first summit of 2012 to finalize a German-led deficit-control treaty and to endorse the statutes of a €500 billion bail-out fund to be set-up this year. Greek debt deal remained in focus as well on Monday as Greece appeared to be close to reaching a debt restructuring agreement with private- sector creditors, but tensions between Greek and German leaders over unpopular austerity reforms also weighed negatively on investor’s sentiments. The 5-year yield fell to record low of 0.7157% in early trading, but rose slightly to 0.73% later. Furthermore, the benchmark 10-year yields fell 5 basis points (bps) to 1.84%, while the yield on 30- year securities dropped 8 bps to 2.98%, sliding below 3% for the first time since January 19th. Decline in Eurozone economic sentiment comes to a halt in January. Confidence indicators released by the European Commission (EC) today suggest that the economic situation in the Eurozone could be stabilizing in the Q1 2012. After falling for eight consecutive months, the EC’s Economic Sentiment Index (ESI) rose to 92.8 from 91.6 in December [see Chart at http://prospects or http://www.worldbank.org/prospects]. Sentiment improved most in Germany and Spain, but deteriorated in France, Italy and the Netherlands. As with the ESI, the EC’s Business Climate indicator, for the second month running, also improved in January, driven by favorable developments in production trends, export order books and stocks of finished products. The recent uptick in confidence in the Eurozone (including steadying consumer confidence), should bode well towards stabilizing economic activity in the zone. Indeed, preliminary estimates of January’s Purchasing Managers’ Index (PMI) for the Eurozone suggests that economic activity in the zone moved into expansion territory for the first time in five months. Among Emerging Markets…In East Asia and the Pacific, following devastating floods which caused extensive damage to factories and disrupted supply chains last year, Thailand’s industrial production declined for the fourth consecutive month by 25.8% (y/y) in December, according to the Ministry of Industry. The pace of decline however decelerated from the 47.2% (y/y) drop in November. In other signs of improvement, Thailand’s capacity utilization rate, which measures actual output against total production capacity, rose from 40.5% in November to 52.3% in December. 1 Recent issues and other current analysis is also available on the Prospects blog. The Daily Brief is a summary of economic news items for Bank staff whose responsibilities require that they stay abreast of changes in global markets. The views expressed here are those of the various authors and do not necessarily reflect those of the World Bank Group's Executive Directors or the countries they represent. The content is subject to copyright and is not for quotation outside of the World Bank. The Prospects Group of the World Bank is pleased to share this content with GEM subscribers, under the terms and conditions of use agreed upon login (at www.worldbank.org/gem) to the extranet GEM site. Feedback and requests to be added to or dropped from the distribution list, may be sent to eriordan@worldbank.org 2