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Lebanon issues largest global bonds in its history…U.S. consumer confidence
tumbles…Turkey central bank cuts key rates

Financial Markets

U.S. Treasury yields fluctuated on Tuesday after Federal Reserve Chair Janet Yellen signaled that the
central bank will be flexible regarding the timing of raising interest rates. The benchmark U.S. 10-year
yield climbed to as high as 2.11% in early trading, but subsequently declined to 2.04% following Yellen’s
testimony before Congress. U.S. government bonds has declined 2.1% thus far this month, the steepest
monthly drop since December 2009, as many investors have speculated the first Fed rate hike is likely to
come in September this year.

The Lebanese government sold $2.2 billion of dollar-denominated international bonds, the largest sum of
sovereign debt sale in the history of the country, as the most-indebted Arab country took an advantage of
low emerging-market borrowing costs, which are nearly at the lowest level in almost two years, to cover
external financing needs for 2015. The country issued $800 million of bond at the final yield of 6.2% and
$1.4 billion of 15-year bond at a yield of 6.65%. Despite of the spillover effects from the Syrian war
(including the growing threat of the Islamic State of Iraq and the Levant) and political instability, demand
for the country’s new debt was quite strong with domestic investors subscribing 85% of the total issue and
foreign investors covering the remaining 15%.



High Income Economies

The Conference Board consumer confidence index for the U.S. tumbled more-than-expected to 96.4 in
February from an upwardly revised 103.8 in January. Economists had expected the index to drop to a
reading of 99.1 from the 102.9 originally reported for January. The bigger than expected pullback came
as optimism about the short-term outlook was considerably less positive, with the expectations index
declining to 87.2 in February from 97.0. Meanwhile, the present situation index also fell to 110.2 from
113.9.

The Eurozone harmonized index of consumer prices fell 0.6% (y/y) in January, following a 0.2% drop in
December. This was the second consecutive fall in prices and the lowest since July 2009. On a monthly
basis, the index declined 1.6% in January. Core inflation that excludes energy, food, alcohol and tobacco,
slowed to 0.6%, in line with estimate, from 0.7% in December.



Developing Economies

Europe and Central Asia

Turkey’s central bank cut its key interest rate for the second straight month, as widely exp ected by
economists. It lowered one-week repo and overnight borrowing rates by 25 basis points (bpt) each to
7.50% and 7.25%, respectively, and the overnight lending rate by 50 bpt to 10.75%. Although the bank

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cited lower inflation as reason for today's rate cut, it has been widely reported that the bank is under
strong pressure from the government to loosen the monetary policy to boost economic growth ahead of
parliamentary election in June. The latest cut could rekindle market concerns over the build-up of a credit
bubble in the private sector, and the independence of the central bank in Turkey.

Sub-Saharan Africa

South Africa’s GDP grew 1.3% (y/y) in Q4 after the 1.6% expansion in Q3. Economists had expected
growth of 1%. Manufacturing, which makes up 13 percent of the economy, expanded for the first time in
four quarters, and contributed most to overall expansion. For 2014 as a whole, GDP rose 1.5% following
the 2.2% growth in 2013.

February 24, 2015



The Global Daily is an informal briefing on global economic and financial developments compiled by the
World Bank’s Development Economics Prospects Group. Recent issues, together with analysis of a
variety of macroeconomic topics, covered by the Group, may be found at:
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