Monthly Briefing on the World Economic Situation and Prospects, No. 66

• Financing conditions improve in euro area peripheral?countries and in emerging economies
• ?U.S. economy bounces back after a difficult first?quarter
• ?China?s first-quarter GDP growth the slowest in?two years

Sovereign debt markets in the peripheral countries of the euro area?have rallied since the fourth quarter of 2013, with yields on 10-year?government bonds falling to pre-crisis levels and in some cases even?below. Yields on Spanish 10-year bonds, for example, fell?below 3.1 per cent, their lowest level since 2005. In part, the euro area?peripheral countries have benefited from the flight to relative quality?capital flows of emerging economies. In addition, the improvements?in economic prospects in peripheral countries have become a more?relevant factor. Portugal, for instance, has decided to exit its rescue programme without a line of credit from the European Union?(EU), as did Ireland earlier this year, demonstrating the extent of?the improvements in their fiscal positions. Other factors are also at?play, particularly the expectation that the European Central Bank?(ECB) will embark on a new quantitative easing (QE) programme,?consisting of large-scale asset purchases in the near future. Overall,?lower borrowing costs may lead to a virtuous cycle, by strengthening?Governments? finances and helping economic growth.