Thursday, October 12, 2017 09:58 AM / FSDH 

Executive Summary 

Domestic Scene

International Scene

Global Developments
Inthe countries we monitored, the prices of government bonds recorded moredecreases than increases in September 2017, compared with August 2017. The8.80% September 2023 Turkey Government Bond recorded the highest month-on-monthprice decrease of 1.40% to 91.60. This was followed by the 1.75% May 2023United States (U.S) Government Treasury Note with a decrease of 1.16% to 98.49.

The17% April 2022 Egypt Government Bond recorded the highest month-on-month priceincrease of 5.58% to 106.50. This was followed by the 16.39% January 2022Nigeria Government Bond, with a price increase of 1.94% to 101.63. The China,India, Kenya, Russia, South Africa, and U.S Bonds closed the month at positive realyields. Other bonds we monitored closed the month at negative real yields.

TheKenya Government Bond offered the most attractive real yield amongst theselected bonds in September 2017. The US economy grew by 3.1% in Q2 2017, fromthe final estimate released by the U.S Bureau of Economic Analysis (BEA). It isthe strongest growth rate since Q1 2015. The BEA added that private inventoryinvestment increased more than previously estimated, but the general picture ofeconomic growth remains the same. Similarly, the inflation rate in the U.Sincreased to 1.9% year-on-year (Y-O-Y) in August 2017, from 1.7% in July 2017.

Itis the highest reading in three months, due to rising shelter and gasoline costas Hurricane Harvey shut down refineries in the Gulf coast. The United StatesFederal Reserve (U.S Fed) kept its Federal Funds Rate (Fed Rate) unchanged at1%-1.25% at its September 2017 meeting. The Fed also indicated that it willbegin to unwind its quantitative easing from October 2017.

The Global GDP
TheOrganization of the Petroleum Exporting Countries (OPEC) reviewed upwards itsglobal growth forecast to 3.5% for 2017 in its monthly report for September2017, from 3.4% in its August 2017 monthly report. The growth forecast for 2018is unchanged at 3.4%. OPEC indicated that the global economic growth momentumhas gained traction lately and has become more balanced, with all majoreconomies now showing positive growth in 2017.

Thegrowth forecast is driven by improved economic activities in the Organisationfor Economic Growth and Development (OECD) economies. The strong economicgrowth dynamics in the Euro-zone and the U.S economy are the main drivers ofthe economic growth expectation in the OECD. Additionally, the major emergingeconomies held up well, as China’s growth in HY1 2017 was better-than-expected.

Majorstructural reforms in India in HY1 2017 had negative impacts on its growthduring the period. Russia and Brazil will also continue their recovery, thoughthis also depends on developments in commodity prices and politics, as well aspresidential elections in both countries in the coming year. . OPEC highlightedthat the challenges remain for the global economic growth outlook, mainlyrelated to global political developments and upcoming monetary policydecisions, particularly in the US and the Euro-zone.

Itadded that high valuations in equity and bond markets, with low volatility,pose a risk at a time when central banks have become more willing to reducemonetary stimulus measures. It is also of the opinion that debt levels remainhigh in some key economies, an issue that will probably require furtherattention if interest rates continue to rise gradually, particularly in theU.S.

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