Interest Rate Monitor

April 21, 2013

2

Brief Overview

Inflation, monetary stimulus withdrawal and delay in Eurobonds may smooth decrease in interest rates.

International MENA Region

Local Economy

Interest Rate Forecasts

Amman Stock Exchange Local Debt Monitor

Prime Lending Rates

Markets overview

Markets overview

New and analysis

US: Treasury yields lower amid weak global outlook and explosions

Eurozone: Deviation continues between economic figures and government bonds’ yields

Major Indices: Stocks drop due to economic negative outlook

Commodities and Currencies: Gold started to recover lossed

Central Bank Meeting Calendar

Interest Rate Forecast

The Week Ahead

Higher yields and Cabinet reshuffle

GCC News Highlights

Comparative MENA MarketsJapan: Japanese investors’ outflow expected to accelerate

3

International

4

US Treasury bond rates

Treasury yields decreased to lowest levels in 4 months close to 1.70% amid concerns of weaker growth in US and Chinese economies.

Retail data in the US was disappointing, while growth in China reached 7.7% in 1st quarter compared to expectations of 8%.

Explosions in Boston have weighed on stock markets and increased appetite for safe treasury instruments.

5

Downward pressure on European bond yields

• There is yet a deviation in performance between EU peripheral economies and bonds of those countries.

• While industrial and retail figures for the Eurozone were sluggish last week, most EU sovereign bonds’ yields went down; including Spanish and Italian government bonds.

• The last auction for Italian government bonds was covered strongly by retail investors, sending positive signals for debt markets.

• German bunds yields decreased as well, since most global economic figures expectations were missed, and due to week Eurozon figures.

• Easing in Japan is still urging investors to move for higher yielding assets; including those in Europe.

6

Japanese investors outflows to increase in coming months

Since BOJ started its easing measures to attain its new inflation target of 2%, Japanese investors have decreased their net selling of foreign assets to reach JPY 331 Billion last week compared to JPY 1141 Billion one week before.

Japanese pensions’ investments outside Japan have also increased at the end of 2012.

The outflows of Japanese investors are anticipated to increase in coming months; which may result in price increase of international government bonds including those in Europe.

What can also proves the trend of investments’ outflows from Japan, is the JPY net short position in FX future markets, and the accompanied increase in EUR long positions.

7

International Stock Markets: Down due to weak economic outlook

8

Commodities & Currencies : Gold to start recovering losses

9

Major Interest Rate Forecasts

10

The Week Ahead,,,

11

Central Bank Meetings Calendar

Expected Rate Decision

Current Rate Month Central Bank

0.25% 0.25% May 1 US Federal Reserve (FOMC)

0.75% 0.75% May 2 European Central Bank (ECB)

0.50% 0.50% May 9 Bank of England (BoE)

0.10% 0.10% April 26 Bank of Japan (BOJ)

0.00% 0.00% June 20 Swiss National Bank (SNB)

3.00% 3.00% May 7 Reserve Bank of Australia (RBA)

2.50% 2.50% April 23 Reserve Bank of New Zealand (RBNZ)

Calendar for upcoming meetings of main central banks :

12

Regional

13

Egypt: Higher Yields & Cabinet Reshuffle

• The Egyptian Pound continued its deterioration, while yields on USD 2020 Egyptian government bonds continued to increase, amid continued uncertainty about negotiations on IMF Loan.

• In addition, the President is planning to change the government and governors of provinces in steps to mitigate political turmoil in the country.

• Egyptian government debt service is anticipated to increase by 30% next fiscal year; placing more pressure in government finances and growth plans.

• The government is also planning to issue EGP 3 Billion next week in 3 and 6 months bills at 13.70% and 14.65% respectively.

14

GCC News

Oman stock market fall last week, mainly due to bank profits that came below forecasts.

UAE found to be the biggest capital exporter between other countries, with USD 55 Billion. Saudi Arabia came second with USD 26 Billion.

IMF cuts forecasts for MENA region growth to become 3.10% down form its expectation of 3% growth in October 2012.

The IMF forecast cut was partially due to lower oil prices, that are expected to continue falling if global recovery comes to be sluggish this year and the year after.

Nakheel; the real estate developer operating in Dubai, witnessed a 36% increase in net income as UAE’s property market rebounds.

15

Comparative MENA MarketsFor the period 12/04 – 18/04

16

Locally

17

Local interest rates forecasts and major developments

• Excess liquidity has continued its upward trend, while the reversal trend from Dollar to Dinar is yet observed.

• Jordan has received the second trench of the IMF loan ($ 385 Million), and a new Kuwaiti deposit of $ 250 Million.

• The decrease in government bonds’ yields has started to weigh on JOD denominated deposits in the banking sector.

18

Government Shift From Local to External Debt is Expected to Continue Weighing on Interest Rates

2013 budget, including public entities JD Million Percent of GDP

Net Internal Debt 887.31 3.66%

Net External Debt 1,615.14 6.66%

Net total debt 2,502.45 10.31%

The shift will help reducing demand on local liquidity reducing accordingly interest rates.

Introducing the Sukuk market may lead interest rates lower as NEPCO may cover its finances through the JD 1 Billion Islamic excess liquidity.

Rates are expected to go down for government bonds, credit facilities and customer deposits

19

Inflation, easing withdrawal and delay of Eurobonds may smooth the decrease in interest rates

Inflation may go beyond 10% if refugees numbers increase, and if the government increases electricity and water tariffs.

The IMF in its last statement made clear that current high benchmark rates set by the Central Bank of Jordan are needed to face inflationary pressures.

If CBJ decides to withdraw the monetary stimulus injected in the market last year, excess liquidity may go down; which will reduce downward pressures on market interest rates.

Delaying the Eurobond till end of year means that more pressure will be placed on domestic liquidity by government borrowing in coming months.

20

Amman Stock ExchangeFor the period 14/04 – 18/04

ASE free float shares’ price index ended the week at (2062.9)

points, compared to (2091.4) points for the last week,

posting a decrease of 1.36%. The total trading volume during

the week reached JD(73.6) million compared to JD(81.7)

million during the last week. Trading a total of (71.80)

million shares through (30,881) transactions

The shares of (179) companies were traded, the shares

prices of (55) companies rose, and the shares prices of (98)

declined.

Top 5 losers for the last week

Stock % chg

Arab real estate development (28.57%)

Al Amal financial investments (21.43%)

Al-sanabel international for Islamic investments (19.75%)

Union Tobacco & Cigarette industries (15.92%)

International cards company (12.70%)

Top 5 gainers for the last week

Stock % chg

United Arab Investors 25.00%

Jordan Press Foundation/al-ra'i 17.43%

Tuhama for financial investments 16.00%

Jordan clothing company 13.33%

Shareco brokerage company 6.45%

21

Local Debt MonitorLatest T-Bills

As April 21, the volume of excess reserves, including the overnight window deposits held at the CBJ JD(2,711) million.

Yield (%) Size - million Maturity Date Issue Date 3 months T-Bills

2.898% 50 14/03/2012 14/12/2011 29/2011

2.844% 50 12/03/2012 12/12/2011 28/2011

Yield (%) Size - million Maturity Date Issue Date 6 months T-Bills

3.788% 50 14/08/2012 14/02/2012 02/2012

3.433% 50 23/01/2012 23/01/2012 01/2012

3.232% 50 08/06/2012 08/12/2011 27/2011

Yield (%) Size - million Maturity Date Issue Date 9 months T-Bills

4.285% 75 04/12/2012 04/03/2012 05/2012

4.229% 75 29/11/2012 29/02/2012 04/2012

4.169% 75 22/11/2012 22/02/2012 03/2012

Coupon (%) Size - Million Maturity Date Issue Date 1 year T-Bills

5.345% 75 15/04/2014 15/04/2013 04/2013

6.750% 70 26/02/2014 26/02/2013 03/2013

6.750% 50 14/02/2014 14/02/2012 02/2013

6.750% 70 27/01/2014 27/01/2012 01/2013

22

Local Debt MonitorLatest T-Bonds Issues

Coupon (%) Size - million Maturity Date Issue Date 2 years T-Bonds

6.604% 75 10/04/2015 10/04/2013 T2213

6.788% 50 08/04/2015 08/04/2013 T2113

6.950% 50 04/04/2015 04/04/2013 T2013

Coupon (%) Size - million Maturity Date Issue Date 3 years T-Bonds

6.98% 75 17/04/2016 17/04/2013 T2313

7.770% 75 31/03/2016 31/03/2013 T1913

7.958% 75 27/03/2016 27/03/2013 T1813

8.163% 75 25/03/2016 25/03/2013 T1713

Coupon (%) Size - million Maturity Date Issue Date 4 year T-Bonds

7.246% 37.5 15/01/2016 15/01/2012 T0312

6.475% 50 16/11/2015 16/11/2011 T4211

Coupon (%) Size - million Maturity Date Issue Date 5 years T-Bonds

7.750% 75 11/03/2017 11/03/2012 T0712

7.489% 50 19/01/2017 19/01/2012 T0412

Coupon (%) Size - million Maturity Date Issue Date Public Utility Bonds

8.134% 26 05/09/2015 05/09/2012 PB55 (Water Authority)

7.966% 20 29/07/2015 29/07/2012 PB005 (Housing & Urban Development)

7.724% 150 26/04/2017 26/04/2012 PBO12 (National Electricity)

23

Prime Lending Rates

24

Disclaimer The materials of this report may contain inaccuracies and typographical errors. Cairo Amman Bank does not warrant the accuracy or completeness of the

materials or the reliability of any advice, opinion, statement or other information displayed or distributed through this report. You acknowledge that any reliance on any such opinion, advice, statement, memorandum, or information shall be at your sole risk. Cairo Amman Bank reserves the right, in its sole discretion, to correct any error or omission in any portion of the report without notice. Cairo Amman Bank may make any other changes to the report, its materials described in the report at any time without notice.

The information and opinions contained in this report have been obtained from public sources believed to be reliable, but no representation or warranty, express or implied, is made that such information is accurate or complete and are provided "As Is" without any representation or warranty and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy any securities or other investment and\or to be relied on for any act whatsoever.

Information and opinions contained in the report are published for the assistance of recipients "As Is", but are not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any recipient; they are subject to change without notice and not intended to provide the sole basis of any evaluation of the instruments discussed herein. Any reference to past performance should not be taken as an indication of future performance. Cairo Amman Bank does not accept any liability whatsoever for any direct, indirect, or consequential loss arising from any use of material contained in this report.

All estimates, opinions, analysis and/or any content for whatsoever nature included in this report constitute Cairo Amman Bank’s sole judgments and opinions without any liability and/or representation as of the date of this report and it should not be relied upon as such.

Cairo Amman Bank reserves the right to change any part of this report or this legal Disclaimer at any time without notice. Any changes to this legal Disclaimer shall take effect immediately. Notwithstanding the above, Cairo Amman Bank shall not be obliged to keep this report up to date.

The Recipient agree to defend, indemnify and hold harmless Cairo Amman Bank and its subsidiaries & affiliate companies and their respective officers, directors, employees, agents and representatives from any and all claims arising directly or indirectly out of and in connection of the recipient activities conducted in connection with this report.