Global Economic Prospects : Financial Markets Outlook, June 2014

External financing conditions for developing countries have been remarkably favorable in recent months, reflecting expectations of a more drawn-out period of monetary policy accommodation in high-income countries and some narrowing of external vuln...

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Bibliographic Details
Main Authors:	Ju Kim, Eung, Stocker, Marc
Format:	Publications & Research
Language:	English en_US
Published:	World Bank Group, Washington, DC 2015
Subjects:	ACCOUNTING ALLOCATION OF CAPITAL ASSET CLASSES BAILOUT BALANCE OF PAYMENTS BALANCE SHEET BANK BALANCE SHEETS BANK LENDING BANK POLICY BANKING SECTOR BASIS POINT BASIS POINTS BENCHMARK BOND BOND FINANCING BOND FLOWS BOND ISSUANCE BOND MARKET BOND SPREADS BORROWER BORROWING COSTS CAPITAL FLOW CAPITAL FLOWS CAPITAL INFLOW CAPITAL INFLOWS CAPITAL MARKET CAPITAL MARKET REFORMS CAPITAL OUTFLOWS CAPITAL RATIOS CASH FLOWS CDS CENTRAL BANK CENTRAL BANKS COMMERCIAL BANKS CONSUMER BASE CORPORATE BOND CORPORATE BOND ISSUANCES CORPORATE BORROWERS CORPORATE DEBT COUNTRY EQUITY CREDIT CONSTRAINTS CREDIT DEFAULT CREDIT DEFAULT SWAP CREDIT GROWTH CREDIT RATING CREDIT RATINGS CREDIT RISKS CREDITOR CREDITWORTHINESS CURRENCY CURRENCY DEPRECIATION CURRENCY DEPRECIATIONS CURRENCY DEVALUATION CURRENCY MARKETS CURRENCY MISMATCHES CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURVE YIELD DEBT FLOWS DEBT INSTRUMENTS DEBT LEVELS DEBT OBLIGATIONS DEFICIT FINANCING DEFICITS DEPOSIT DEPOSIT RATES DEPOSITS DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DISBURSEMENT DOMESTIC CREDIT EMERGING MARKET EMERGING MARKET ASSETS EMERGING MARKET BONDS EQUITIES EQUITY FUNDS EQUITY INVESTMENT EQUITY ISSUANCE EQUITY MARKETS EXCHANGE RATE EXCHANGE RATES EXPORT COMPETITIVENESS EXPOSURE EXTERNAL DEBT EXTERNAL FINANCING FAVORABLE FINANCING FEDERAL RESERVE FEDERAL RESERVE BANK FINANCIAL CRISIS FINANCIAL DERIVATIVES FINANCIAL EXPOSURES FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL STRESS FISCAL CONSOLIDATION FIXED INCOME FIXED INTEREST FIXED INTEREST RATES FIXED RATE FOREIGN BANK FOREIGN CAPITAL FOREIGN CURRENCY FOREIGN DEBT FOREIGN DIRECT INVESTMENT FOREIGN EXCHANGE FOREIGN EXCHANGE MARKETS FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN OWNERSHIP GLOBAL BOND GLOBAL ECONOMIC PROSPECTS GLOBAL EQUITY GLOBAL RISK GLOBAL TRADE GOVERNMENT BOND GOVERNMENT BOND MARKETS GOVERNMENT BOND YIELDS GOVERNMENT BONDS GOVERNMENT DEFICITS GOVERNMENT GUARANTEES GOVERNMENT SECURITIES GOVERNMENT SECURITIES MARKETS HOLDINGS INCENTIVE STRUCTURE INDEBTEDNESS INFLATION INFLATION EXPECTATIONS INFLATION RATE INFLATION STARTS INITIAL PUBLIC OFFERING INSTITUTIONAL INVESTORS INTEREST RATE INTEREST RATE SHOCKS INTERNATIONAL BOND INTERNATIONAL BOND MARKETS INTERNATIONAL CAPITAL INTERNATIONAL CAPITAL MARKETS INTERNATIONAL INVESTMENT INTERNATIONAL MARKETS INTERNATIONAL RESERVES INVESTMENT ASSETS INVESTMENT GRADE BORROWERS INVESTMENT PATTERNS INVESTMENT PORTFOLIO IPO LABOR MARKET LIABILITY LIQUIDITY LOCAL CURRENCY LOCAL GOVERNMENT LOCAL GOVERNMENTS LONG-TERM INTEREST LONG-TERM INTEREST RATES MACROECONOMIC POLICIES MARKET ACCESS MARKET CONDITIONS MARKET CONTAGION MARKET EXPECTATIONS MARKET TRANSPARENCY MATURITIES MIDDLE-INCOME COUNTRIES MONETARY FUND MONETARY POLICY MULTINATIONAL CORPORATIONS NATURAL RESOURCES NET CAPITAL NON-PERFORMING LOANS OUTPUT OUTPUT GAPS PORTFOLIO PORTFOLIO FLOWS PORTFOLIO INVESTMENT PORTFOLIO INVESTMENTS PRIMARY MARKET PRINCIPAL PAYMENTS PRIVATE CAPITAL PRIVATE DEBT PRIVATE LOANS PUBLIC DEBT REAL INTEREST REAL INTEREST RATE REAL INTEREST RATES REGULATORY ENVIRONMENT REMITTANCE REPAYMENT REPAYMENTS RESERVE RESERVE BANK RESERVES RETURN RETURNS RISK AVERSION RISK PROFILE SECURITIES SHORT-TERM DEBT SOVEREIGN BOND SOVEREIGN BOND MARKETS SOVEREIGN BONDS SOVEREIGN DEBT SOVEREIGN DEBT MARKETS SOVEREIGN DEFAULT STOCK INDEX STOCK MARKET STOCK MARKET INDICES STOCK MARKET VOLATILITY STOCK MARKETS STOCK OPTIONS TOTAL DEBT TRADE FINANCING TRADING TREASURIES TREASURY TREASURY BONDS TREASURY YIELD TREASURY YIELDS YIELD CURVE
Online Access:	http://documents.worldbank.org/curated/en/2014/06/23946198/null http://hdl.handle.net/10986/21525

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Summary:	External financing conditions for developing countries have been remarkably favorable in recent months, reflecting expectations of a more drawn-out period of monetary policy accommodation in high-income countries and some narrowing of external vulnerabilities. Additional easing by the European Central Bank, combined with prospects of modest growth and stable inflation in the United States ( Goldilocks recovery ), helped pull down bond yields and volatility worldwide. These benign conditions currently provide support to capital inflows and activity across developing countries, but could at the same time increase the risk of greater and potentially more abrupt market adjustments ahead. Despite some reduction of current account deficits in several developing countries, many remain vulnerable to sudden shifts in investors sentiment and capital outflows. Following a brief period of market turmoil at the start of the year, global financing conditions have eased consider-ably from March to June. Bond spreads for developing countries (i.e. yield difference with 10-year U.S. Treasury bonds) have narrowed, bringing down average borrowing costs to their lowest level since the spring of 2013. Stock markets have also recovered rapidly from a significant sell-off in January/February, despite rising geopolitical tensions and evidence of disappointing activity in the first quarter of the year. As presented in the June 2014 edition of Global Economic Prospects, a more favorable global environment is reflected in upward revisions to capital inflow forecasts for developing countries, now projected to remain broad-ly stable as a percentage of GDP in 2014 and 2015, at around 5.6 percent, before declining again in 2016, to 5.1 percent. While baseline forecasts assume an orderly in-crease in long-term interest rates in high-income countries, the risk of more abrupt adjustments from current low levels has recently increased. Escalating geopolitical tensions or financial stress in some developing countries could also potentially trigger a sudden re-pricing of risk. Despite the recent narrowing of current account deficits in some developing countries, many remain vulnerable to a sharp increase in borrowing costs and/or significant currency depreciations, which could put additional strain on corporate and bank balance sheets.

Global Economic Prospects : Financial Markets Outlook, June 2014

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