economic-research.bnpparibas.com Emerging 4.5 4.0 5.3 …economic-research.bnpparibas.com/Html/Forecasts/Prevision_fr.pdf · France 0.2 1.2 1.8 0.6 0.4 1.5 -1.0 0.0 -0.0 -4.0 -3.7

Group Economic Research http://economic-research.bnpparibas.com

Summary of macroeconomic forecasts GDP Growth Inflation Curr. Account / GDP Fiscal balances / GDP

% 2014 2015 e 2016 e 2014 2015 e 2016 e 2014 2015 e 2016 e 2014 2015 e 2016 e

Advanced 1.8 1.9 2.3 1.4 0.5 1.9

United States 2.4 2.4 2.9 1.6 0.4 2.5 -2.3 -2.5 -2.8 -2.8 -2.8 -2.4

Japan -0.1 0.8 0.9 2.7 0.9 1.5 0.5 2.8 2.7 -5.5 -4.3 -3.9

United Kingdom 2.8 2.3 2.0 1.5 0.3 1.7 -5.5 -4.6 -3.5 -5.0 -3.9 -2.7

Euro Area 0.9 1.6 1.9 0.4 0.2 1.5 2.1 3.1 3.1 -2.4 -2.0 -1.5

Germany 1.6 1.8 2.3 0.8 0.5 1.8 7.8 8.1 8.1 0.7 0.8 1.0

France 0.2 1.2 1.8 0.6 0.4 1.5 -1.0 0.0 -0.0 -4.0 -3.7 -3.3

Italy -0.4 0.8 1.3 0.2 0.2 1.1 1.9 2.0 2.3 -3.0 -2.6 -2.2

Spain 1.4 3.2 2.9 -0.2 -0.3 1.1 0.8 0.8 1.0 -5.8 -4.4 -2.9 Portugal 0.9 1.7 1.8 -0.2 0.7 1.4 0.6 1.3 1.5 -4.6 -3.1 -2.8

Emerging 4.5 4.0 5.3 5.6 6.2 6.2

China 7.4 7.1 7.3 2.0 1.2 1.7 2.1 4.0 4.0 -2.1 -2.4 -2.8

India 7.1 7.1 7.5 6.7 5.4 7.2 -1.7 -1.3 -1.4 -4.4 -4.1 -3.9

Brazil 0.1 -2.0 0.5 6.3 8.6 6.6 -4.0 -4.3 -4.3 -6.2 -6.4 -5.9

Russia 0.6 -2.5 1.5 7.8 13.0 6.2 3.2 2.9 3.0 -0.5 -3.6 -1.6

World 3.3 3.1 3.9 3.7 3.6 4.3

Source : BNP Paribas Group Economic Research / GlobalMarkets (e: estimates & forecasts)

In the US, the economy is running at 2.5% annual path, while the unemployment rate is falling toward 5%, time for monetary policy

to become less accommodative. Although lower oil prices and stronger dollar weigh on headline inflation, the first rate hike is likely

to occur by end-2015 With low inventories, low real interest rates, upswing in prices and optimistic surveys, the housing market will

continue to do well, supporting private consumption Corporates are still largely self-financing their capital spending (high margins)

and investment is likely to keep healthy. Main risk : fall in oil prices to dampen capex in the energy sector.

In the euro zone, the recovery has been on a good track until mid-2015 (growth close-to +1.5% annual path), but the perspective of

a “Grexit” has dampened business surveys as well as market prices recently. In Germany, the expected IfO index is down for the

third month in a row in June, suggesting that activity might become less dynamic for a while.

1 US GDP growth and composite ISM 2 EMU GDP growth and composite PMI

▌GDP, q/q, ann. [L]

▬ ISM composite [R]

30

35

40

45

50

55

60

65

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2009 2010 2011 2012 2013 2014 2015 2016


▬ PMI composite [R]

35

40

45

50

55

60

-8%

-6%

-4%

-2%

0%

2%

4%

2008 2009 2010 2011 2012 2013 2014 2015 2016 Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, BNP Paribas

Some pay-back after the very strong GDP number printed by the

end of last year. Yet, the US activity keeps on a solid trend and

may have rebounded in Q2.

The PMI indexes were good until June, in line with a 1.5% to 2%

annual rate of growth in GDP.

Group Economic Research /// OECD Countries /// Eco’Charts /// 09 July 2015

Summary of financial forecasts Interest rates 2015 2016 ######## ######## ########

End of period, % Q1 Q2 Q3e Q4e Q1e Q2e Q3e Q4e 2014 2015e 2016e

US Dol. Fed Funds 0.25 0.25 0.25-0.50 0.5-0.75 0.75-1.00 1.00-1.25 1.25-1.50 1.75-2.00 0.25 0.5-0.75 1.75-2.00

Libor 3m $ 0.27 0.28 0.75 1.00 1.30 1.55 1.85 2.30 0.26 1.00 2.30

T-Notes 10y 1.93 2.33 2.50 2.75 2.80 2.85 2.95 3.00 2.18 2.75 3.00

Euro. A. ECB "Refi" 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05

Euribor 3m 0.02 -0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.08 0.00 0.00

Bund 10 ans 0.18 0.77 0.55 0.70 0.80 0.95 1.10 1.25 0.54 0.70 1.25

OAT 10y 0.42 1.20 0.85 0.95 1.05 1.20 1.35 1.55 0.84 0.95 1.55

BTP 10y 1.29 2.31 1.65 1.60 1.75 1.95 2.15 2.35 1.88 1.60 2.35

R-Uni BoE Base rate 0.50 0.50 0.50 0.50 0.75 0.75 1.00 1.25 0.50 0.50 1.25

Gilts 10y 1.58 2.03 2.10 2.25 2.35 2.40 2.50 2.60 1.76 2.25 2.60

Japon BoJ Ov ernight 0.02 0.01 0.10 0.10 0.10 0.10 0.10 0.10 0.07 0.10 0.10

JGB 10y 0.40 0.44 0.55 0.60 0.70 0.80 1.00 1.00 0.33 0.60 1.00

Exchange rates 2015 2016

End of period Q1 Q2 Q3e Q4e Q1e Q2e Q3e Q4e 2014 2015e 2016e

USD EUR / USD 1.07 1.11 1.04 1.02 1.00 1.00 1.02 1.04 1.21 1.02 1.04

USD / JPY 120 122 127 130 132 132 134 136 120 130 136

EUR EUR / GBP 0.72 0.71 0.69 0.68 0.68 0.69 0.69 0.70 0.78 0.68 0.70

EUR / CHF 1.04 1.04 1.08 1.10 1.10 1.10 1.10 1.10 1.20 1.10 1.10

EUR / JPY 129 136 132 133 132 132 137 141 145 133 141

Source : BNP Paribas Group Economic Research / GlobalMarkets (e: Estimations, prév isions)

3 US, interest rates vs nominal GDP growth 4 Euro area, interest rates vs nominal GDP growth

─ ─ US nominal GDP growth, y /y

▬ Fed funds rate ▬ 10y bond yield

-4%

-2%

0%

2%

4%

6%

8%

2009 2010 2011 2012 2013 2014 2015 2016

Forecast

─ ─ Euro area nominal GDP growth, y /y

▬ ECB "refi" rate ▬ German 10y bond yield

-4%

-2%

0%

2%

4%

6%

8%

2009 2010 2011 2012 2013 2014 2015 2016

Forecast

Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, BNP Paribas

Far below the “natural” rate implied by GDP growth Stick to zero for the foreseeable period

5 Euro Area, spreads of Italy and Spain vs Germany 6 Euro area, euro-dollar vs interest rates differential

▬ Spain, 10y gov. rates spread with Germany

▬ Italy, 10y gov. rates spread with Germany

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

2009 2010 2011 2012 2013 2014 2015 2016

Forecast

▬ 3M EUR-USD rates spread

▬Euro vs dollar [RHS]

1.00

1.10

1.20

1.30

1.40

1.50

1.60

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2009 2010 2011 2012 2013 2014 2015 2016

Forecast


EBC”s purchases to put a cap on spreads,


The US economy

7 US, housing market, strong recovery ahead 8 US, investment cycle vs corporate profits

▬ Housing starts, x1000 [L]

▬ NAHB [R]

0

30

60

90

0

500

1 000

1 500

2 000

2 500

3 000

1990 1995 2000 2005 2010 2015

▬ Nonfinancial corporate, fixed investment (% value added) [L]

▬ Nonfinancial corporate, net profits (% value added) [R]

2%

4%

6%

8%

10%

12%

14%

14%

16%

18%

20%

22%

1990 1995 2000 2005 2010 2015 Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, BNP Paribas

The NAHB index still suggests housing starts will continue to

gain momentum.

Corporate investment continues to recover, in the wake of high

profit margins

9 US, retail sales not booming, but robust 10 US deleveraging, a concern for China?

▌Private consumption, 3m/3m, ann. [L]

▬ Retail sales, vol., 3m/3m, ann. [R]

-15%

-10%

-5%

0%

5%

10%

15%

-6%

-3%

0%

3%

6%

2008 2009 2010 2011 2012 2013 2014 2015 2016

car sales (adjusted to

scale)

▬ US, households debt ratio (%gross income) -L-

▬ China, exports (% GDP) -R-

10%

20%

30%

40%

80%

100%

120%

140%

2000 2005 2010 2015 Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, BNP Paribas

Private consumption (read the left scale) is very robust, thanks to

the pick-up in employment and the fall in energy bill.

US households are still reducing their debt to income ratio, a

process that weighs on Chinese exports.

11 US, no concern for inflation… neither deflation 12 US, no concern for inflation… neither deflation

▬ CPI Core y/y

▬ CPI Headline, y/y

-30%

-20%

-10%

0%

10%

20%

30%

40%

-3%

-2%

-1%

0%

1%

2%

3%

4%

2009 2010 2011 2012 2013 2014 2015 2016

Energy

▬ CPI Core, y/y [LHS]

▬ Unit labor costs, y/y [RHS]

-3%

-2%

-1%

0%

1%

2%

3%

4%


Energy is largely responsible for the decrease in inflation rate.

Core inflation (excluding food and energy) is rather stable and

below 2%, which is the official target.

No particular concern on wage front. However, at 5.5% in Feb.

the unemployment rate is moving closer to the NAIRU as

computed by the Fed.


The US economy

13 US, non-farm payrolls vs unemployment rate 14 US, labour force participation rate

▬ Monthly change in nonfarm payrolls (x1000) [L]

▬ Unemployment rate [R]

4%

5%

6%

7%

8%

9%

10%

-800

-600

-400

-200

0

200

400

2009 2010 2011 2012 2013 2014 2015 2016

Participation rate

% of total population

63%

62%

64%

66%

68%

1985 1990 1995 2000 2005 2010 2015 Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, BNP Paribas

Nonfarm payrolls have come stronger recently The trend is now

close largely above +200K jobs (net) per month, allowing the

unemployment rate to fall further

Part of the fall in the unemployment rate is explained by the

historical low rate of labour force participation (workers getting

older or simply discouraged don’t apply for a job…)

15 US, corporate credit, back to pre-crisis level 16 US, mortgage loans, far from pre-crisis level

▌Credit to corporate*, net flows, an $bn [L]

▬ Banks tightening credit, % [R]

-30

0

30

60

90

-600

-400

-200

0

200

400

600

800

1 000

2005 2007 2009 2011 2013 2015

▌Mortgage credit ., net flows $bn an. [L]

▬ Banks tightening credit, % [R]

-30

0

30

60

90

-600

0

600

1 200

1 800


Credit conditions are loose and flows to corporate (loans & bond

issues) are back to their pre-crisis level…

… which is not the case for mortgage loans. They have recently

stopped to contract, after a five year period of slump. But lending

activity for house purchases is still very weak

17 US, narrowing budget deficit 18 US, narrowing current account deficit

Budget balance

% GDP

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

2000 2003 2006 2009 2012 2015

Current account balance

% GDP

-6%

-4%

-2%

0%

2%

2000 2003 2006 2009 2012 2015 On the fiscal front, brakes are coming off owing to improved

receipts. The federal budget deficit is shrinking rapidly.

Current account deficit is closing at a time when the US economy

is recovering, a rather unusual story.


The US economy

19 US, Fed funds rate and inflation 20 US, real Fed funds rate and unemployment rate

▬ Fed funds

▬ Core CPI, yy

-4%

-2%

0%

2%

4%

6%

8%

2000 2003 2006 2009 2012 2015

Negative real Fed funds rates

▌Real Fed Funds rate [L]

▬ Unemployment rate [R]

3%

4%

5%

6%

7%

8%

9%

10%

-4%

-2%

0%

2%

4%

6%

8%

2000 2003 2006 2009 2012 2015

Negative real Fed funds rates


Fed funds rates have been negative in real terms for now six

years.

A 5% to 5.5% level in unemployment rate is the limit where real

Fed fund rates start to be positive.

21 US, real estate investment trusts balance sheet 22 US, Federal reserve balance sheet

REITS Balance sheet

▬ MSB, $bn [R] ─ Repo as % of total liabilities [L]

0

50

100

150

200

250

300

350

0%

10%

20%

30%

40%

2000 2003 2006 2009 2012 2015

Federal Reserve, total assets

USD bn

2-juil.0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 Source : Thomson Datastream, IMF, BNP Paribas Source : Thomson Datastream, BNP Paribas

Real estate investment trusts (REITS) use repo markets as a

source of funding for longer-term, less-liquid assets like RMBS.

Some are vulnerable to contagion risks / asset fire sales [IMF].

entities is mortgage real estate investment trusts (mREITs)

Federal Reserve’s total assets increased more six time since

2007 and now account for 25% of GDP. The QE is now over and

the Fed is expected to hike rates by mid-2015.

23 US, dollar effective exchange rates 24 US, investment hit by falling oil prices, stronger dollar

Dollar, real effective exchange rate

Deviation from long-term average

-30%

-20%

-10%

0%

10%

20%

30%

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

▌Invest. Mach.& Eqpt., q/q, ann. [L]

▬ Cap. Good orders , 3m/3m, ann. [R]

-60%

-40%

-20%

0%

20%

40%

-30%

-20%

-10%

0%

10%

20%

2009 2010 2011 2012 2013 2014 2015 2016 Source : Thomson Datastream, IMF, BNP Paribas Source : Thomson Datastream, BNP Paribas

Looking at the real effective exchange rate (trade weighted &

adjusted for inflation) the dollar has moved back toward its long

term equilibrium level.

Stronger dollar and falling energy prices may have dampen

corporate investment during the first quarter of 2015, especially

in the shale oil sector.


The Euro area economy

25 Euro area, better prospects 26 Euro area, consumption strengthening


▬ PMI composite [R]

35

40

45

50

55

60

-8%

-6%

-4%

-2%

0%

2%

4%

2008 2009 2010 2011 2012 2013 2014 2015 2016

▌Private consumption, yy

▬ Retail sales, vol., yy

-4%

-2%

0%

2%

4%


The composite PMI close to the 55 level suggests GDP would

expand at a 1.5% to 2% annual pace over the first half of 2015.

Consumption to be the main driver behind the Eurozone recovery

at the early stage of 2015. Data are particularly impressive in

Germany.

27 Germany, GDP growth vs business surveys 28 France, GDP Growth vs business surveys


- - - PMI Manuf.[R] ▬ PMI composite [R]

30

35

40

45

50

55

60

65

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2009 2010 2011 2012 2013 2014 2015 2016


- - - Composite indicator (BdF&Insee) ▬ PMI [R]

30

35

40

45

50

55

60

65

-8%

-6%

-4%

-2%

0%

2%

4%

6%


Better business surveys + buoyant retail sales point toward

stronger activity at the start of 2015.

The rebound is not as impressive as in Germany. However,

surveys are less depressed, companies own prospects look

better in the manufacturing industry

29 France, construction activity still very low 30 France, budgetary effort

Housing permits and starts

12 m cumulated, x1000

200

300

400

500

600

1991 1995 1999 2003 2007 2011 2015

Change in Gen. Govt. primary structural deficit, % GDP

█ EMU █ France

0.0%

0.5%

1.0%

1.5%

2012 2013 2014 2015 Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, European Commission BNP Paribas

Part of the French poor performance in Europe is due to the

housing market, trending at all-time low. According to the INSEE,

the fall in the property market drags 0.4pp to growth in 2014.

The fiscal effort (the reduction in structural deficit) has come

higher in France than in the rest of the Euro area since 2013. But

the way is will be prolonged through 2015 is an open question



31 Italy, GDP growth vs business surveys 32 Spain, GDP growth vs business surveys



30

35

40

45

50

55

60

65

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2008 2009 2010 2011 2012 2013 2014 2015 2016



30

35

40

45

50

55

60

65

-8%

-6%

-4%

-2%

0%

2%

4%

6%


By early 2015, the first genuine sign of expanding activity since

four year…

Spain is on a good track. The PMI above the 55 level suggests

that the economy keeps expanding at a 2% 2.5% annual rate…

33 Euro area, fixed investment vs cap. utilization rate 34 Euro area, corporate fixed investment vs profits

▬ Investment (Mach. & Equipt) % of GDP (LHS)

▬ Capacity utilisation rate (RHS)

70%

75%

80%

85%

90%

9.5%

10.0%

10.5%

11.0%

11.5%

2000 2003 2006 2009 2012 2015

▬ Investment (Mach. & Equipt) % of GDP (LHS)

▬ Unit profit margin index, whole economy. (2002 = 100, RHS)

98

100

102

104

106

9.5%

10.0%

10.5%

11.0%

11.5%


Higher capacity utilisation rates… … and stabilisation in profit margins might prompt companies

investment to pick up, albeit from very low levels.

35 Euro area, trend in corporate profits 36 Euro area, trend in unit labour costs

Corporates profit margin index, 2002 = 100

▬ Spain ─ Ireland

90

100

110

120

130

2002 2005 2008 2011 2014

Unit labor costs (2001 = 100)

▬ EMU - - -France ─ Spain

100

110

120

130

140

2000 2002 2004 2006 2008 2010 2012 2014 Source : Thomson Datastream, BNP Paribas Source : Thomson Datastream, BNP Paribas

Corporate profits at historical high in Spain, Portugal and Ireland Spain is becoming more and more competitive within the Euro

area, challenging Italy & France…



37 Euro area, trend in exports for some countries 38 Euro area, the periphery is getting more and more

competitive

Exports, 2008 = 100 (vol.)

▬ Germany ─ Spain

80

90

100

110

120

2008 2009 2010 2011 2012 2013 2014 2015 2016

Current account, % GDP

▬ Italy ─ ─ Portugal ─ Spain --- Ireland

-15%

-12%

-9%

-6%

-3%

0%

3%

6%

9%

2008 2009 2010 2011 2012 2013 2014 2015


Spain and Portugal : an export- led recovery, that now spreads

on domestic demand, mainly companies investment

“Internal devaluations” led to a significant reduction in unit labour

costs and surge in external surpluses at the periphery of the

EMU

39 EMU, distribution of foreign direct investments 40 EMU, closing imbalances

Foreing direct investments

% GDP, 2 year cumulated flows, upt to 2014Q1

-2%

-1%

0%

1%

2%

3%

4%

IR PT GR ES BG FN FR IT NL BD OE

Intra EMU trade balances, % GDP

▬ Germany - - - Italy ─ Spain

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

2008 2009 2010 2011 2012 2013 2014 2015


… It also allowed foreign direct investments to come back. Intra-EMU imbalances have been reduced or closed, as a result

of the global deleveraging process. For the first times since the

launch of the euro, Germany gets no trade surpluses inside EMU

41 Germany, current account balance with China 42 EMU, current account balance

German current account with China

% GDP

-1.0%

-0.5%

0.0%

0.5%

2001 2003 2005 2007 2009 2011 2013 2015

Current account balance

% GDP

-2%

-1%

0%

1%

2%

3%


Part the German surpluses have shifted from EMU to emerging

countries. Trade in goods and services with China is now

generating positive revenues

The largest current account surplus ever seen…



43 Euro area, the fall in the euro beccomes very supportive 44 Euro area, decoupling yields

Trend in th euro (2011 = 100)

▬ Against the dollar ─ Trade weighted

80

85

90

95

100

105

110

115

2011 2012 2013 2014 2015

▬ 10y Govt. Bond yield, Germany

▬ 10y Govt. Bond y ield, US

0.85%

2.4%

2-juil.

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%


Down 20% against the dollar, 10% in nominal effective terms.

Empirical models suggest the positive response to the shock

could be +0.5/ +0.7 pp of GDP after one year.

10 year yield spread between the Bunds and Treasuries is close

to 200 bps, a record.

45 Euro Area, credit to corporates vs bank lending survey 46 Spain, credit to corporates (<1y, EUR 1mn)

▌Credit to corporate*, net flows EUR bn [L]

▬ Expected tightening, % [R] - - - Expected demand, % [R]

-30

-15

0

15

30

45

60

75

90

-400

-200

0

200

400

600

800

1 000

1 200

2005 2007 2009 2011 2013 2015

Spain, credit to corporates (<1y & 1M EUR)

▬ Annualized net flows (EURbn, s.a., monthly) ▬ Trend

-200

-100

0

100

2008 2009 2010 2011 2012 2013 2014 2015


ECB’s bank lending surveys are improving with credit standards

back to their normal levels. Demand for credit addressed by the

private sector is weak, but expected to improve…

… credit to corporates (under 1 year and EUR 1mn) tends to pick

up in Spain, albeit from very depressed levels.

47 Fall in interest rates… not everywhere 48 Cross border lending activity as not yet recovered

Interest rates on banks lending to corporates (<1y, 1MEUR)

▬ Spain --- France ─ ECB (refi)

0%

1%

2%

3%

4%

5%

6%

7%

2003 2006 2009 2012 2015

Cross border holdings, "Core" vs "Periphery"

% GDP

10%

15%

20%

25%

30%

1999 2002 2005 2008 2011 2014


First positive reaction of ECB asset purchase program? Interest

rates charged by Spanish banks have come down recently …

Cross border lending activity is still very low in the Eurozone and

partly explained by the new regulatory environment



49 Euro Area, M3 vs core inflation rate 50 Monetary aggregates, Euro area vs US

▬ CPI Core y/y [L]

▬ M3, y/y [R]

-3%

0%

3%

6%

9%

12%

15%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1997 2000 2003 2006 2009 2012 2015

Monetary aggregates (2008 = 100)

— EMU (M3) ▬ US (M2)

150

140

130

120

110

100

160


The main monetary aggregate M3 is bottoming out. But this is

largely as a result of investors shift toward liquid assets from

longer-term financial liabilities.

Money growth still subdued when compared to other developed

countries like the US or UK.

51 Euro area, core inflation rate by country 52 Euro Area, ECB “refi” rate vs determinants

Core inflation

May. 2015

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

OE IR BG BD NL EMU FR IT FN PT ES GR

▬ Core inflation rate [L]

▬ Unemploment rate [R, inv.] - - - "Refi" rate [L]7%

8%

9%

10%

11%

12%

13%0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%


Now positive everywhere except in Greece The ECB has opted for an ultimate cut in interest rates on sept.

4. The refi is now 0.05%, while the deposit facility is charged at

0.20%. We do not expected any change in key rate before 2018.

53 Italian 10 year rates 54 Spanish 10 year rates

Italy, Govt. bond yields

▬ 10y ─ 2y

2.33%

0.41%

2-juil.

0%

1%

2%

3%

4%

5%

6%

7%

8%

2008 2009 2010 2011 2012 2013 2014 2015

Spain, Govt. bond yields

▬ 10y ─ 2y

2.31%

0.40%

2-juil.

0%

1%

2%

3%

4%

5%

6%

7%

8%


A sharp rebound in 10 year yield as a result of global bond price

reassessment. No particular tension on spreads, despite of

Greece…

Same story



55 Central bank balance sheet 56 Central bank balance sheet (at June 2015)

Central banks total assets, % of GDP

▬ ECB ─ Fed - - - BoE - - - BoJ

0%

10%

20%

30%

40%

50%

60%

70%

80%

2007 2009 2011 2013 2015

Gen. Govt. Debt hold by central banks

% of 2014 GDP

3.1%

20.9%24.4%

59.7%

ECB BoE Fed Boj


On sept 4 2014, the ECB announced it will start buying ABS and

reintroduce a security market program focused on covered

bonds. It’s balance sheet will start to expand again…

ECB’s public debt holding has nothing to compare with those of

others central banks. However, a large QE (10pct of GDP)

based on government bonds purchases is launched

57 Banks current account to the ECB 58 EUR vs GBP

- - - Rate on deposit facility [RHS]

▬ Excess reserves, €bn [LHS] ▬ Deposit facility, €bn [LHS]

-0.20%

-0.10%

0.00%

0.10%

0.20%

-1 000

-500

0

500

1 000

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

2000 2003 2006 2009 2012 2015

3M Rates differential (%)

EUR vs GBP [L]

Source : Thomson Datastream, BNP Paribas

The ECB has opted for a negative interest rate on deposit

facilities and excess reserves. Banks current accounts to the

ECB have come down, but will start to rise again with the QE.

Reactive to real rates spreads…


FOCUS ON PUBLIC FINANCES

GDP Gen. Gov. fiscal balance Interest payment Public debt

Total Primary Struct. Total

In 2014 €bn €bn %GDP %GDP %GDP €bn %GDP Av. rate €bn %GDP Rating S&P

Germany 2 904 19.4 0.7 2.4 1.2 50.6 1.7 2.3 2 170 74.7 AAA

France 2 142 -84.8 -4.0 -1.8 -2.6 47.1 2.2 2.4 2 038 95.1 AA

Italy 1 616 -49.1 -3.0 1.6 -0.9 75.2 4.7 3.6 2 135 132.1 BBB-

Spain 1 058 -61.4 -5.8 -2.5 -2.0 34.5 3.3 3.6 1 034 97.7 BBB

Netherlands 655 -15.0 -2.3 -0.8 -0.2 9.5 1.4 2.2 451 68.8 AA+

Belgium 402 -13.1 -3.2 -0.2 -2.8 12.4 3.1 3.0 428 106.5 AA

Austria 329 -7.9 -2.4 -0.0 -0.4 7.8 2.4 3.0 278 84.5 AA+

Greece 179 -6.4 -3.5 0.4 0.4 7.0 3.9 2.2 317 177.1 CCC-

Portugal 173 -7.7 -4.5 0.5 -0.8 8.6 5.0 3.9 225 130.2 BB

Finland 204 -6.4 -3.2 -1.9 -1.6 2.6 1.3 2.3 121 59.4 AA+

Ireland 185 -7.6 -4.1 -0.1 -4.1 7.5 4.0 3.5 203 109.6 A+

EMU 10 070 -259.1 -2.6 0.1 -1.0 271.1 2.7 2.9 9 515 94.5

United Kingdom 2 222 -126.3 -5.7 -2.9 -5.3 60.9 2.7 3.4 2 055 92.5 AAA

EU 13 929 -401.9 -2.9 -0.3 -1.7 353.7 2.5 3.0 12 341 88.6

United States 13 113 -643.5 -4.9 -1.3 -4.0 478.8 3.7 3.8 15 032 114.6 AA+

Japan 3 478 -269.8 -7.8 -5.7 -7.8 70.5 2.0 0.9 8 301 238.7 AA- Sources : European Commission, BNPP


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+33.(0)1.55.77.47.31 [email protected]

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