61361



                      DECPG Daily
        Economics and Financial Market Commentary
                      July 10, 2009
 Mick Riordan (x31289), Cristina Savescu (x80812), Nadia Islam Spivak (x80504)
   Eung Ju Kim (x85804), Shane Streifel (x33867), Annette De Kleine (x34710)
  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.


International financial market
Auction of 30-year bonds caps off week’s $73 billion in Treasuries sales. The U.S.
government’s $11 billion sale of 30-year notes on Thursday marked the week’s final
auction of Treasury securities. The government already conducted three auctions
through Wednesday: $35 billion in three-year notes, $19 billion in 10-year notes, and $8
billion in Treasury Inflation-Protected Securities. Although results of the 30-year auction
were mixed, demand for U.S. government debt has been rising, especially from foreign
central banks. That class of investors bought nearly 44% of the 10-year notes sold on
Wednesday, compare to about 34% at the last month’s auction.
U.S. exports increase, trade gap narrows The U.S. trade deficit in May narrowed to
$26 billion, the lowest gap in trade since November 1999. The reduction in the deficit
was largely due to a 1.6% (m/m) increase in exports, mainly petroleum products and
industrial machinery and aircrafts, which brought total exports to $123 billion. Imports
continued to decrease, falling by 0.6% (m/m) to $149 billion in May. Imports of crude oil
and petroleum products fell further from $13.8 billion in April to $12.9 billion in May,
while demand for imported consumer durables remained unchanged.
Japanese wholesale price in record plunge… The Bank of Japan’s index of
corporate goods prices dropped 6.6% (y/y) in June, the largest annual drop on record.
This is the sixth consecutive month with a drop in y-o-y prices in Japan, and a
considerable increase from the 5.5% (y/y) drop in inflation measured in May [see Daily
Chart at http://gem or http://www.worldbank.org/gem]. However, the pace of monthly
deflation has eased considerably since February, as the fall-off in commodity and
energy prices moderated from the fourth quarter plunge. Deflation in June was 3.4%
(m/m, saar) compared to 5.7% in May.

Among emerging markets...In East Asia and Pacific, China’s export growth declined
21% (y/y) in June after a 26% drop in May. Exports rose 7.5% (m/m) in seasonally
adjusted terms. The y-o-y decline in imports was only 13% (y/y) the smallest decrease
in eight months – moderating substantially as stimulus measures lifted import demand
15.6% (m/m) in June. Taken together, China’s trade surplus narrowed to $8.25 billion,
the lowest in 2 years.



                                                     1
In South Asia, India’s industrial production jumped 2.7% (y/y) in May, the fastest pace in
eight months, and twice the 1.2% gain recorded in April.
In Central and Eastern Europe and the CIS, Russia’s central bank cut key interest rates
for the fourth time in three months by 50 basis points, bringing the benchmark
refinancing rate to 11%, and the repurchase rate to 10%.
In Sub-Saharan Africa, Botswana’s economy shrank 20.3% (y/y) in the first quarter as
activity in the mining sector contracted by 68% (y/y). Mining accounts for the vast
majority of Botswana’s exports, which plunged 62% (y/y) over the same period.




*****************************************************
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