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Economy

UPDATE 2-Fitch downgrades Sri Lanka on rising default risk

(Adds context, fund manager comment, graphic)

LONDON, Nov 27 (Reuters) – Fitch downgraded Sri Lanka’s sovereign credit rating to “CCC” on Friday, warning the country’s debt levels were set to soar past 100% of GDP and that it was increasingly at risk of default.

Sri Lanka relies on tourism and garment exports for foreign exchange reserves. It’s been hit hard by the pandemic, which has undercut consumer demand and curtailed almost all global travel this year.

The CCC rating means Fitch considers default to be “a real possibility”, according to its ratings framework, as it added to Sri Lanka’s string of downgrades this year.

“We think there are now increasing risks to Sri Lanka’s ability to meet its external debt repayments,” the firm’s analysts said in a note.

In a statement, Sri Lanka’s finance ministry called the downgrade “baseless” and “based on uncorroborated facts” saying the government had acted to contain the economic impact of the pandemic faster than many other emerging countries.

“We do not accept this downgrade as it fails to recognize the robust policy framework of the new government for addressing the legacy issues,” the statement said.

Sri Lanka has around $4 billion of debt repayments due annually until 2025. Its foreign exchange reserves stand at just under $6 billion leaving it little room to spare.

Earlier this month, Finance Minister Mahinda Rajapaksa presented an ambitious budget that aimed to more than halve the fiscal deficit over the medium term. But Fitch said it expected the country’s fiscal position to worsen, not improve, over the next few years.

It expects the government’s ratio of debt to gross domestic product to increase to about 100% in 2020 from 86.8% in 2019 and to rise to around 116% in 2024. Sri Lanka’s own targets see a reduction in debt-to-GDP to 75.5% in 2025, from an estimated 95.1% in 2020.

BIG GAME TALK

Rival ratings agency Moody’s downgraded Sri Lanka to an equivalent level in September, noting the country’s debt repayments in the next few years.

Sri Lanka’s bond prices fell by more than 40% in the first half of the year, though they have since recovered some ground.

Kevin Daly, a portfolio manager at Aberdeen Standard Investments, said the rating agency downgrades and bond market turbulence represented a stark difference to the Sri Lankan government’s optimism about its situation.

“Clearly default is a last resort for the government and would be a blow to their credibility because they have been talking a big game,” he said.

While Sri Lanka’s bonds have rallied, its debt is among the riskiest of any country not already in default, he added.

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Economy

Former World Bank chief and 'voice for the poor' James Wolfensohn dies aged 86

WASHINGTON (REUTERS) – James Wolfensohn, a former investment banker who pushed through debt relief for the poorest nations during a decade at the helm of the World Bank, has died, the Bank said on Wednesday (Nov 25). He was 86.

Mr Wolfensohn, a former Salomon Brothers partner, was appointed as president of the global development bank by then-US President Bill Clinton and led the Bank from June 1995 through May 2005. Born in Australia, he became a US citizen in 1980.

In 1979, he helped orchestrate the rescue of US carmaker Chrysler from the verge of bankruptcy, together with Chrysler’s chief executive Lee Iacocca and Paul Volcker, who was then president of the New York Federal Reserve.

Together with the International Monetary Fund, Mr Wolfensohn in 1996 launched the Heavily Indebted Poor Countries Initiative, a program that eventually provided more than US$53 billion (S$71 billion) in debt relief to 27 of the world’s poorest countries.

Current IMF managing director Kristalina Georgieva mourned the passing of her friend, mentor and former boss.

“He was a hero to me as he was to so many,” she said in a statement. “Jim transformed the world of development and he transformed the World Bank. In the process, he became, quite literally, the voice for the poor people on our planet.”

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Economy

GLOBAL MARKETS-Stocks dip on U.S. jobs data, oil climbs further

* MSCI’s all-country world index hits fresh record before slipping

* 2020 asset performance tmsnrt.rs/2yaDPgn

* Global stock market outlook: tmsnrt.rs/3nT0J5r (Updates prices, changes comment, dateline; previous London)

NEW YORK, Nov 25 (Reuters – Stocks edged back from record highs on Wednesday as Wall Street bumped up against underwhelming economic data, while oil continued to rise and the dollar weakened ahead of comments from the Federal Reserve.

The U.S. dollar has lost some of its safe-haven luster as traders turn to riskier assets, including some funded in other currencies, following positive news about a COVID-19 vaccine and a seemingly normalizing U.S. transition of power.

Former Fed Chair Janet Yellen’s reported nomination to Treasury Secretary has emboldened those risk bets and further weighed on the dollar.

“From here, the Fed will prove a mere auxiliary to maximize fiscal impact by ensuring cheap funding,” said John Hardy, head of FX strategy at Saxo Bank.

“The long-term implications of the Yellen nomination are distinctly dollar negative.”

Minutes from the most recent Fed meeting are due later in the session.

The dollar index fell 0.076%, with the euro up 0.14% to $1.1905.

The Japanese yen strengthened 0.13% versus the greenback to 104.31 per dollar, while sterling was last trading at $1.3363, up 0.05% on the day.

On Wall Street, a surprise jump in weekly jobless claims added to signs the recovery in the labor market was stalling as the United States battled a new wave of COVID-19 infections.

MSCI’s broadest gauge of world stocks was last trading down 0.12%, after renewed demand for shares earlier pushed it to a record high of 622.12.

The rally in global stocks is set to continue for at least six months, a Reuters poll forecast on Wednesday.

But on Wednesday the Dow Jones Industrial Average fell 141.76 points, or 0.47%, to 29,904.48, the S&P 500 lost 11.17 points, or 0.31%, to 3,624.24 and the Nasdaq Composite added 3.45 points, or 0.03%, to 12,040.23.

“The question is, who wins the battle: the vaccines, or the rising cases in the short term?” said Christopher C. Grisanti, chief equity strategist at MAI Capital Management.

Optimism around vaccine developments and expectations of a recovery in corporate confidence and profitability should also push European stocks to near record highs next year, a separate Reuters survey found.

On Wednesday the pan-European STOXX 600 index lost 0.09% while Japan’s Nikkei rose 0.50% after touching a 29-year high.

MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.59% lower, with Chinese shares capped by worries about rising debt defaults.

The job market data weighed on Treasury yields.

Benchmark 10-year notes last rose 7/32 in price to yield 0.8586%, from 0.882% late on Tuesday.

Oil continued to rise beyond pre-pandemic levels on bets for a speedy recovery in energy demand.

“Crude oil prices are trading at their highest levels since early March, supported by positive market sentiment as a result of vaccine news and strong oil demand in Asia,” said UBS oil analyst Giovanni Staunovo.

“We maintain our bullish outlook for next year and target Brent to hit $60 per barrel at the end of 2021,” he added.

U.S. financial markets will be closed on Thursday for the Thanksgiving holiday.

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Economy

Female-owned small businesses report ailing health during the COVID-19 pandemic

Alicia Scott went from answering phones and doing the filing at a roofing company to being a production manager and then a vice president. She then struck out on her own.

“A couple of years ago, I decided I had enough working crazy hours and being the first one in and the last to leave,” Scott said. “I decided that it was time to make a change, so I started my own company.”

Scott, who lives in Golden, started Roots to Roofs in 2017, offering landscaping and exterior construction services. Her staff grew to eight full-time employees, but has been cut in half since the coronavirus pandemic exploded. The company’s revenue has dropped by 40%.

“We’ve tightened up ship quite a bit. We’re not taking on any marketing, stuff like that,” said Scott, when asked if she thinks her company can hang on. “But it’s been difficult.”

Weathering the pandemic has been rough for many businesses, but a recent report released by the U.S. Chamber of Commerce said female-owned small businesses have been disproportionately affected. A survey by Ipsos found that the businesses were more likely than those owned by men to report a significant decline in the health of their business since the pandemic started. They were also less likely to be planning new investments for the coming year.

Before the pandemic, 67% of the male owners described the overall health of their business as “somewhat or very good,” compared to 60% of female-owned businesses. In July, 62% of male owners still described their businesses that way, while only 47% of female owners did.

“When you look at the broader context, it is a giant alarm bell,” said Tom Sullivan, vice president for small-business policy at the U.S. Chamber of Commerce.

That’s because over the last five years, female-owned businesses, about 42% of the small businesses nationwide, saw their employment grow 8%, compared to just 1.8% for all businesses, according to a 2019 report by American Express. The number of female-owned small businesses increased 21% during that period compared to 9% for businesses overall.

Sullivan said it’s troubling to see the fast-growing segment of the small-business economy losing steam.

There are 139,760 female business owners in Colorado, accounting for 39.8% of all business owners in the state, according to a new report by Self Financial, which helps build and improve credit. Colorado has the 14th-highest percentage of female business owners.

The pandemic has magnified inequities faced by minority- and female-owned businesses, like access to loans and other capital, Sullivan said. Compounding the challenges is that many female-owned businesses, such as retail shops and hair salons, rely on foot traffic and are more vulnerable when restrictions are imposed.

More federal help is needed, Sullivan said. The chamber is pushing for bipartisan support for more stimulus funding.

Kisha Mays, founder and CEO of Just Fearless and an angel investor, said she believes it’s a matter of when, not if, Congress approves more money to help businesses cope with the pandemic.

“But that next bill of coronavirus relief won’t happen at least until maybe February 2021,” Mays said. “And you still have Thanksgiving, Christmas, New Year’s — three months essentially. How are these businesses that need help now supposed to wait for three months and hope they’ll get help?”

So, Mays, whose company works with primarily female-owned businesses, sped up a grant program that was in the works. One of her ventures, HERstory Connections, a support network for female entrepreneurs, closed the first round of applications for $5,000 grants and expects to open another.

“It might help them pay rent for a month or two. It might help them make payroll,” Mays said.

Her long-term goal is to see 1 million female business founders produce a minimum of $1 million in annual revenue by the end of 2025. Mays said less than 2% of female-owned businesses now generate at least seven figures in annual revenue.

“We start businesses at a faster rate than men but we get funded at a slower rate,” Mays said. “And now you see them struggling.”

Scott, the roofing company owner, didn’t apply for a grant or other funding but has turned to women’s business organizations, including HERstory, for support, networking, training sessions and other resources.

“Just having someone to talk with and connect with, to be able to get through whatever challenges we’re going through, that’s been really big for me.”

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Economy

Work from home revolution surprise boon for India's women

MUMBAI (BLOOMBERG) The coronavirus pandemic has hit women worldwide with job losses and closures of childcare centres. Yet a surprising bright spot is emerging: India’s US$200 billion (S$268.4 billion) technology services industry, where new rules are expected to provide female workers with a broad swath of flexible work arrangements and fresh employment opportunities.

On the outskirts of New Delhi, Teena Likhari, 45, quit her job running operations for the Indian back office of a Silicon Valley company in 2018 because of a family medical emergency. Looking to rejoin this year, she expected a market stunted by lockdowns. Instead, the pandemic had made work-from-home mainstream in her industry, which had long shunned the practice.

Not only did the operations manager quickly land a job with Indian outsourcer WNS Global Services, but working from her home in the city of Gurgaon, she began overseeing a 100-member team in the city of Pune about 900 miles away.

Ms Likhari is one of the early beneficiaries of India’s decision to lift decades-old restrictions on remote work in back office firms because of the pandemic. The tech services industry – one of the country’s most important financially – can now allow employees to shift from traditional offices to work-from-anywhere arrangements, permanently if needed. Indian women, who have often had to sacrifice for their husbands’ careers or other commitments at home, have much to gain from the policy change.

“Even a year ago, an operations leader working remotely would’ve been unimaginable,” said Ms Likhari, who has seen scores of women quit work after childbirth, marriage or when a family member fell ill. “The change will allow so many career women like me to do what we do from home, it’s a game changer.”

India’s large numbers of English-speaking graduates and cheaper costs relative to the West have spawned a sprawling industry that’s often called the world’s back office because of its global reach. The broad outsourcing sector, which includes technology services in addition to business processes, employs about 4.5 million people. Foreign banks from Deutsche Bank to Barclays run wholly owned centres handling everything from global payrolls to technology infrastructure maintenance for themselves and customers. Local outsourcers Tata Consultancy Services and WNS offer everything from data analytics to support on financial and accounting processes to international clients.

The pandemic has changed workplaces globally but the new norms are particularly significant in India. Social conventions that required women to move to their husband’s locations or stay with family in small towns, or simply be available inside the home to care for elders and children have shut out millions of qualified female workers. Greater flexibility and the opportunity to work from anywhere would give them choices they’ve never had before.

Also, India’s old rules – originally designed to prevent misuse of leased telecom lines – had prevented permanent work from home arrangements in back offices. But the pandemic pushed the government to remove decades-old reporting obligations, such as those requiring companies to provide office network diagrams in order to get international communication circuit allocations. The changes opened the door for people to work from home on a long-term basis.

A huge segment of working women in India, particularly the less privileged, have faced many of the same problems that have beset their global counterparts during the pandemic as they’ve had to juggle childcare, online schooling and office work from home, forcing some to drop out. Millions of female rural workers and daily wage earners lost jobs because they can’t work from home. Yet, the changes in the technology services industry show just how deeply the pandemic is forcing Indian companies to reimagine workplaces.

Companies like WNS, which caters to the likes of Virgin Atlantic Airways, Tesco and Avon Products, are envisaging a hybrid office and home model, satellite offices in small cities and a blend of full-time employees and gig workers.

“We’ll see work going to people rather than people going to work,” said Keshav Murugesh, group chief executive officer of WNS which employs 43,000 workers globally, nearly 30,000 of them in India. “With flexible hours or selected work days, over 100 million Indian women with secondary degrees, could potentially find employment,” he said.

Mumbai-headquartered Tata Consultancy, closing in on half a million workers, has already committed to a “25-by-25” strategy – by 2025, only 25 per cent of its workforce will be working inside an office at any one time.

More on this topic

“Given time and location flexibility, less women will quit after having children,” said N.G. Subramaniam, chief operating officer of Tata Consultancy, Asia’s largest outsourcer with US$22 billion in annual revenue. “More women will stay in the workforce, more will reach senior leadership levels.”

A third of India’s technology services labour force comprises women, already a better gender ratio than most other industries in the country, Nasscom, the industry trade association says. Work from home opportunities in back offices may now offer more opportunities to qualified women in small towns who aren’t allowed to migrate to bigger cities for work.

Most of the back office outsourcing centres are located in sprawling campuses within big cities like Bangalore or New Delhi. Barclays, for instance, has over 20,000 workers providing technology solutions globally and UBS Group has 6,000 employees, about a third of them in Mumbai alone. Deutsche Bank employs 11,500, nearly half of whom are in the neighbouring city of Pune. Most of these workers have been operating from home during the pandemic.

“There is so much talent in smaller cities that has been untapped so far,” said Madhavi Lall, head of human resources at Deutsche Bank India. “Flexible work arrangements would certainly bring that talent to the fore, especially women who find it difficult to migrate or shift their base.”

More on this topic

The pandemic has pushed discussions on future work models and strategies, especially with regard to arrangements like staggering employee shifts, rotating days or weeks of in-office presence, she said. And that along with the change in India’s government rules will enable more women to join the workforce.

While India is evolving, cultural norms need to progress further, said Debjani Ghosh, president of Nasscom. Added flexibility could certainly improve women’s participation in the workforce. But it could also increase pressure to simultaneously deliver on the home front.

“If work-from-anywhere has to succeed,” Ms Ghosh said, “the mindset that women have to work as well as single-handedly manage the home has to change.”

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Economy

Manitoba non-essential stores adapt while COVID-19 surge prompts closures

Brian Tkachyk misses the customers who would walk into his Wall Street antique store out of curiosity.

“That’s the part you miss, that’s the fun part: meeting new people, new, interesting people,” Tkachyk said.

Like thousands of other businesses selling goods deemed non-essential under Manitoba’s latest public health order — put into place midnight Friday as COVID-19 cases surge to record levels in the province — Tkachyk can no longer allow people into his shop, Brian’s Corner Antiques and Thrift.

Instead, he’ll have to rely on online sales.

He said he prepared more for the latest iteration of a lockdown — the spring shutdown was more worrying.

“When the pandemic first broke out it was a little tough because it came from out of nowhere,” he said, noting he took advantage of a provincial gap funding program which has allowed him to breathe easier amid the strict orders that will leave his door shuttered until at least Dec. 11.

Now, he’s going to try to make some sales online — selecting choice items he thinks people might want to buy, then using Kijiji and social media to hawk his wares.

“If you put your mind to it, and put the work into it, you can make up for it quite a bit by online sales, but me, personally, I prefer the walk-in, that’s the way I built the business from the get-go and that’s the way I’d kind of like to keep it,” he said, adding he thinks the holiday season will still be a boon for sales.

“Under the circumstances, I do what I got to do.”

But the Manitoba Chambers of Commerce warns the shutdown is bad news for small retailers at large.

“This is a real challenge for small business, having to move to more of an online platform rather than having the bricks and mortar. The best thing we can do is to get this under control and allow these businesses to open their doors again,” said Chuck Davidson, MCC president and CEO said.

“It’s a lose-lose for everyone in Manitoba right now and it’s a win for the Amazons of the world.”

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Economy

Business associations to help members tap on benefits of RCEP

SINGAPORE – Two business associations have welcomed the signing of the Regional Comprehensive Economic Partnership (RCEP), and said they will help local small and medium enterprises tap on the opportunities provided by the agreement.

Mr Kurt Wee, the president of the Association of Small and Medium Enterprises (Asme) said the pact represents the biggest trade bloc opportunity for many SMEs amid this Covid-19 crisis and could be a much-needed boost for their business growth.

Meanwhile, the Singapore Chinese Chamber of Commerce and Industry (SCCCI) said it would help local enterprises seize new opportunities and collaborate with regional partners to explore new markets.

The RCEP, which was inked on Sunday by ministers from 15 countries including Singapore, is the world’s largest trade pact. Its members account for 30 per cent of the world’s economy and one-third of its population. They comprise all 10 Asean members and key partners Australia, China, Japan, South Korea and New Zealand.

The agreement will broaden and deepen economic linkages across the Asia-Pacific, ease trade in goods and services, facilitate the flow of foreign investments, and enhance protections in areas such as e-commerce and intellectual property.

RCEP members are also obliged to share information that may be relevant to SMEs so that they can benefit from the agreement.

Prime Minister Lee Hsien Loong had on Sunday described the signing of the pact as a “major step forward for the world, at a time when multilateralism is losing ground, and global growth is slowing”.

ASME said on Monday (Nov 16) that the RCEP is critical to building a sustainable response towards economic recovery for the region, at a time when the Covid-19 pandemic has severely disrupted economic activities and livelihood.

It added that the pact brings about exciting opportunities for SMEs looking to expand trade activities within the Asia-Pacific region, and looked forward to rallying SMEs to tap on these.

ASME’s Mr Wee said the pact will benefit businesses by giving them access to China’s large market. It will also open up opportunities for investment from Chinese companies, he said.

“The inclusion of the Asean member states also presents greater prospects for the region due to Asean’s high economic growth rate and fast-growing middle class,” added Mr Wee.

“In time to come, we hope that there will be an easing of business travels between these 15 countries in order to better facilitate business and trade, and to capitalise on these new opportunities.”

ASME added it will share more updates about the trade agreement as it takes effect, and guide SMEs on how to tap the agreement to grow their businesses.

Meanwhile, SCCCI urged businesses to take the opportunity to review their business models with an open mind in order to benefit from the “formation of vast supply chain and intensified multilateral cooperation” that is expected to be realised with the agreement.

It said its representative offices in Shanghai, Chengdu and Chongqing could help Singapore companies integrate into the Chinese market and promote collaborations between Chinese and Singapore firms on investments in third countries.

Beyond China, SCCCI said it can tap its partnerships with Chinese chambers and business organisations in other RCEP member countries to promote collaboration with firms from Singapore.

Its president Roland Ng said: “We are glad to see governments of various countries demonstrating the joint commitment to further deepen economic and trade ties.

“RCEP will pave the way for a faster recovery of the regional economy from the pandemic.”

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Economy

UPDATE 2-Rouble hits one-week low vs dollar on COVID-19 fears, oil price

(Adds Rosneft shares, updates prices)

MOSCOW, Nov 13 (Reuters) – The Russian rouble slipped to a one-week low against the dollar on Friday as the global rise in coronavirus cases weighed on risk assets, oil prices fell and the positive impact of hopes for a COVID-19 vaccine wore off.

The rouble has had a volatile few weeks, plunging to its lowest versus the euro since late 2014 on the eve of the U.S. election and then posting its biggest one-day gain against the dollar in four years the day after the vote.

By 1402 GMT, the rouble was 0.3% weaker at 77.57 versus the dollar, after briefly touching 77.7075, its weakest since Nov. 6.

Versus the euro, the rouble fell by 0.5% to 91.67 , far from levels of around 70 seen in early 2020 before oil prices crashed and the COVID-19 pandemic spread.

Brent crude oil, a global benchmark for Russia’s main export, was down 0.7% at $43.24 a barrel.

The rouble started falling again, coinciding with a decline in oil prices and the weakening of emerging markets currencies, Sberbank CIB analysts wrote.

The rouble showed little reaction to Russia’s decision to tap the global market for the first time in 2020, raising 2 billion euros ($2.4 billion) in Eurobonds.

Russia reported a record 21,983 new coronavirus infections on Friday as Moscow prepared to close restaurants and bars overnight in an effort to contain the pandemic.

Pfizer’s announcement this week of positive trial results from a COVID-19 vaccine it has developed with Germany’s BioNTech had a brief positive impact on markets, but they generally dismissed news about the effectiveness of Russia’s vaccine.

On the stock market, the dollar-denominated RTS index was down 1% to 1,226.7 points. The rouble-based MOEX Russian index was 0.2% lower at 3,019.3 points.

Shares in oil giant Rosneft pared losses to climb after the company said it planned to extend a share buyback programme.

Shares in business conglomerate Sistema rose around 1.7%, outperforming the market on reports its online retailer Ozon planned to raise about $750 million in a U.S. initial public offering.

For Russian equities guide see

For Russian treasury bonds see

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Economy

G-20 agrees on debt framework to help poor countries hit by coronavirus

TOKYO (REUTERS) – G-20 finance ministers have agreed for the first time on a new joint framework for restructuring government debt, in anticipation that the coronavirus crisis will leave some poor countries in need of deep relief.

The Covid-19 pandemic is straining the finances of some developing countries and the G-20 ministers said on Friday (Nov 13) that they recognised that more would need to be done to help them than a current temporary debt freeze, which will be extended until June 30, 2021.

Major creditors, including China, will be expected to follow the common guidelines laying out how debt which is deemed unsustainable can be reduced or rescheduled.

The new framework outlined on Friday borrows heavily from the rules of the Paris Club, an informal grouping of mostly rich country governments that until now was the only joint forum for negotiating debt restructurings.

Under the new framework, creditor countries will negotiate together with a debtor country, which will be expected to seek the same treatment terms from private sector creditors.

G-20 finance ministers said in a joint statement that the framework aims “to facilitate timely and orderly debt treatment” for countries eligible for a debt payment freeze put in place in April, but which included only private sector creditors on a voluntary basis.

“The fact that we, including non-Paris Club members, have agreed on the issue of this kind was historical,” Japanese Finance Minister Taro Aso said, adding that private sector creditors should also stick to the new framework.

“From now on, all interested parties must ensure to implement the common framework. Debt transparency is extremely important,”Mr Aso told reporters after a G-20 conference call.

The new framework also goes further than the debt freeze by requiring all public creditors to participate, after China was criticised by G-20 partners for not including debt owed to its state-owned banks.

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China has become a major creditor to developing countries in recent years, often by lending through institutions such as China Development Bank and China Exim.

But China is wary about debt write-offs and Beijing has defined the state-owned China Development Bank as a private institution, resisting calls for full participation in debt relief.

The Paris Club, which is organised by the French Finance Ministry, and G-20 countries already agreed last month to extend this year’s debt freeze under which they deferred US$5 billion (S$6.7 billion) in debt servicing to help the world’s poorest countries cope with the coronavirus crisis.

G-20 leaders are expected to endorse the common framework at a virtual summit meeting next week.

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Economy

UPDATE 1-ECB's cautious optimism on vaccine supports euro debt markets

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates price action, chart)

LONDON, Nov 13 (Reuters) – German bond yields steadied below two-month highs on Friday, with sentiment in euro zone debt markets supported by a perception that upbeat news on a COVID-19 vaccine will not stop central banks from delivering more stimulus to prop up growth.

News of a vaccine against the novel coronavirus is positive but it will take some time before this has a positive impact on economic activity, European Central Bank policymaker Pablo Hernandez de Cos said on Friday.

That echoed comments from the heads of the Federal Reserve and the ECB on Thursday that stressed the economic outlook remains uncertain.

“They all shared similar concerns that a potential Covid-19 vaccine would not end the economic challenges of the pandemic,” said Deutsche Bank strategist Jim Reid.

Monday’s upbeat news from Pfizer about a COVID-19 vaccine sparked a heavy selloff in U.S. and European bond markets as investors jumped to price in a brighter outlook.

That euphoria has faded as the week progressed, with latest coronavirus headlines highlighting the toll the pandemic continues to take.

France said late on Thursday that there would be no easing for at least two weeks of the country’s second COVID-19 lockdown, with the number of people in hospital with coronavirus now higher than at the peak of the first wave.

Most 10-year bond yields across the euro area were just a touch lower on the day, with Germany’s benchmark 10-year Bund yield trading at -0.54% — almost 8 basis points below 2-month highs hit earlier this week.

Still, the sharp selloff in bonds at the start of the week left Bund yields up almost 8 bps on the week and set for their biggest weekly jump since August.

With the euro zone likely heading back into recession this quarter, the ECB has already said it would provide more stimulus in December.

This week’s ECB comments and concern about the impact from the second wave of the coronavirus have reinforced that expectation.

A long-term indicator of the market’s euro zone inflation expectations, the five-year, five-year forward, fell to 1.1592% having hit its highest levels since September earlier this week above 1.21%.

The ECB will discuss possible tweaks to its inflation target at a seminar next week, Finnish central bank governor Olli Rehn said on Friday.

Italy’s 10-year bond yield was down 2 bps at 0.63%, keeping recent record lows hit around 0.57% in sight and the gap over benchmark German Bund yields close to its tightest levels since early 2018.

Chris Bailey, European Strategist at Raymond James, said talk of more stimulus at a central bank forum hosted by the ECB this week was best summed up by ECB policymaker Francois Villeroy de Galhau remarks on the “need to do more”.

“An unsubtle hint ahead of the ECB’s December meeting,” said Bailey.

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