Morning Report

27.12.2012

Abe and fiscal cliff move markets

NOK & 3m NIBOR 7.45 7.40 7.35 7.30 7.25 16Nov
3m ra.

2.00 1.90 1.80 1.70 06Dec 26Dec

EURNOK

Japanese stock markets rises further, due to the continued yen depreciation that was prolonged after dovish BoJ minutes from the November meeting. Obama has cut his Hawaii Christmas vacation short, and returned to Washington to try and avert the US fiscal cliff. In quiet holiday markets US stock markets fell, pulled down by uncertainty surrounding the outcome of the government budget negotiations. In Asia, the market trend is more positive. The Nikkei index has gone up by nearly 1 percent since opening today, triggered by a further weakening of the yen, which should support the countrys exporters. The USDJPY has come up to 85.8, a level not seen since August 2010. Much of the credit for the depreciation must be attributed to Shinzo Abe, who was formally appointed as Japan's new prime minister yesterday - the seventh in six years. He has made an impressive comeback after he had to resign as prime minister five years ago. His campaign was built on an aggressive program to fight recession and deflation, and the yen has been on a weakening trend since his appointment as a leader of the LDP - the Liberal Democratic Party - in September. Abe's program for a stronger Japanese economy entails a much more active and aggressive central bank. The monetary policy committee has been conservative, although it increased its securities purchase program by 10 trillion yen to 110 trillion at the meeting in December. The minutes from the preceding meeting on 19 - 20 November, published yesterday, were surprisingly dovish, showing that the board is influenced by the mounting political pressure. They were considering new and drastic measures. One member wanted to start an "open-ended" securities purchase program - la Fed - without any specific determination of either the timing or amount, but rather running until the goal of one percent inflation (Japan's official target since February) is within reach. Another member wanted to remove the interest rate (0.1%) on banks' excess reserves at the Bank of Japan. The current Governor has been highly skeptical regarding this measure, and it was rejected with 8 against 1 vote at the meeting in December. On the other side of the Pacific Democrats and Republicans continues to work to avoid falling off the fiscal cliff" on 1 January 2013, when previously agreed cuts in public spending take effect and temporary payroll tax easing as well as tax cuts from Bush's era expires. Although both parties agree that the large budget deficit is a problem, they are far apart on the question of how to shrink it. Efforts to avoid a dramatic tightening suffered a severe blow when Republican negotiator John Boehner failed to get support within his party for his "Plan B" on Thursday night last week. The majority disagreed that Americans with revenues above $1 million should face increased taxes. Obama has cut his Christmas vacation in Hawaii short, and will be in place to enter into new negotiations today. The White House demands that any budget deal must involve an increase in the limit on government borrowing, the so-called "debt ceiling." The current ceiling (USD 16.4 trillion) could be reached already on 31 December, according to the Minister of Finance, Timothy Geithner. He now introduces extraordinary measures to extend the time left, including suspension of issuance of certain securities and suspensions of investments in pension funds. These measures can, according to Geithner, provide an additional space of 200 billion, equivalent to around 2 months of time. Today European markets open again, after several days of vacation. Today's most important macro data are American: US initial claims (expected 360 ') and new home sales in November (expected to rise slightly, to 378'). US consumer confidence is expected to have fallen slightly in December. kjersti.haugland@dnb.no

SEK & 3m STIBOR 9.0 8.8 8.6 8.4 16Nov

3m ra.

1.50 1.40 1.30 1.20 06Dec

EURSEK

26Dec

Headquarters Dronning Eufemias gate 30 0191 Oslo Offices Abroad New York London Singapore Stockholm Sales Oslo (+47) Equity Fixed Income Regional Sales (+47) Bergen Bod Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund Private Clients Research Regional Sales (+47) Eirik Larsen Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Martin Brter Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen Kristina Solbakken

+47 03000

+ 1 212 681 2550 +44 207 283 0050 +65 6220 6144 +46 84 73 48 50

22 94 89 40 24 16 90 30

56 13 27 20 75 52 99 10 69 39 41 50 62 54 14 82 61 24 79 56 38 14 61 64 24 16 90 80 51 84 04 30 77 62 96 80 73 87 49 73 33 01 73 80 70 11 69 85 24 16 90 90

24 16 90 77

24 16 90 08 24 16 90 03 24 16 90 07 24 16 90 04 24 16 90 01 24 16 90 06 24 16 90 02

24 16 90 48 24 16 90 46 24 16 90 47 24 16 90 49 24 16 90 44 24 16 90 45 24 16 90 51

Yesterdays key economic events (GMT) 14:00 US C-S housing prices Todays key economic events (GMT) 13:30 US Initial claims 15:00 US New home sales 15:00 US Consumer confidence

As of Oct As of Week 52 Nov Dec0

Unit % m/m Unit 1000 Mill Index

Prior 0.4 Prior 361 0.638 73.7

Poll Poll 360 0.378 70.0

Actual 0.7 DNB

Morning Report
27.12.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 1.00 0.50 0.00 16-Nov 06-Dec 94 92 90 26-Dec
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.22 1.21 1.20 1.19 16Nov

GBP r.a

0.83 0.82 0.81 0.80 0.79 06Dec 26Dec

CHF

FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK

Prior 85.65 1.323 0.820 1.208 7.394 8.615 7.459 5.594 6.536 0.860 9.039 6.519 7.607 1.166 10.506

Last 85.73 1.325 0.821 1.209 7.395 8.629 7.459 5.581 6.510 0.858 9.014 6.513 7.599 1.168 10.516

% 0.1% 0.2% 0.1% 0.1% 0.0% 0.2% 0.0% -0.2% -0.4% -0.3% -0.3% -0.1% -0.1% 0.1% 0.1%

In 1 m ...3 m 82 81 1.27 1.25 0.80 0.79 1.20 1.20 7.30 7.25 8.65 8.60 7.45 7.45 5.75 5.80 7.01 7.16 0.84 0.84 9.1 9.1 6.81 6.88 5.59 5.57 1.18 1.19 10.81 10.82

...6 m ...12 m 81 82 1.25 1.30 0.79 0.80 1.20 1.20 7.25 7.40 8.60 8.70 7.45 7.45 5.80 5.69 7.16 6.94 0.84 0.85 9.1 9.1 6.88 6.69 5.57 5.49 1.19 1.18 10.82 10.73

FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB

USD 1.0372 0.9930 0.9124 18.93 5.6310 1.6146 7.7515 126.98 0.2814 2.6065 0.5262 0.8208 3.0945 1.2227 30.4950

% -0.07% -0.15% -0.15% -0.39% -0.19% 0.05% 0.01% -0.18% -0.24% -0.22% -0.21% 0.09% -0.57% -0.13% -0.33%

EURSEK & OMXS 9.0 8.8 8.6 8.4 16-Nov 550 500 06-Dec 450 26-Dec
EURSEK

OMXS ra.

1m 3m 6m 12m 3y 5y 7y 10y

NIBOR Prior 1.75 1.83 1.97 2.12 2.23 2.54 2.86 3.20

SWAP AND MONEYMARKET RATES EURIBOR STIBOR Last Prior Last Prior 1.84 1.28 1.28 0.05 1.87 1.30 1.30 0.13 1.99 1.40 1.39 0.22 2.14 1.51 1.51 0.33 2.23 1.33 1.34 0.50 2.53 1.56 1.56 0.82 2.84 1.82 1.82 1.18 3.19 2.10 2.10 1.63

Last 0.05 0.13 0.22 0.33 0.51 0.82 1.18 1.63

USD LIBOR Prior 0.21 0.31 0.51 0.69 0.53 0.89 1.30 1.80

Last 0.21 0.31 0.51 0.69 0.52 0.90 1.32 1.82

Gov. Bonds, 10y 1.80 1.60 1.40 1.20 16Nov 06Dec 26Dec
SEK NOK, ra.

2.30 2.20 2.10 2.00 1.90

10y 10y yield vs bund

NORWAY Prior Last 98.34 98.19 2.18 0.79 2.20 0.81

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 116.4 116.47 101.081 101.03 1.61 0.22 1.60 0.22 1.39 1.39

US Prior 98.875 1.75 0.36

Last 98.73 1.77 0.39

JPY and Dow Jones 13.5 90 13.0 85 12.5 80 12.0 75 160626Nov Dec Dec
USDJPY ra. DowJones, 1000

USD and gold 1800 1700 1600 16Nov 06Dec 26Dec

Gold

1.35 1.30 1.25 1.20

EURUSD ra.

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y sw ap 3m stibor 10y sw ap 3m euribor 10y sw ap 3m libor 10y In 3m 1.90 3.25 1.30 2.25 0.15 1.75 0.35 6m 1.90 3.25 1.30 2.25 0.15 1.75 0.35 12m 1.90 3.50 1.30 2.50 0.15 2.00 0.35 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today MAR 1.86 1.86 0.00 NOK 92.46 0.04 Dow Jones 13,114.6 JUN 1.86 1.86 0.00 SEK 114.50 - 0.19 Nasdaq 2,990.2 SEP 1.88 1.87 0.01 EUR 104.71 0.19 S&P 500 1,419.8 DEC 1.92 1.91 0.01 USD 79.52 - 0.12 Eurostoxx50 2,648.5 FRA SEK 3m Prior chg GBP 83.50 Dax 7,636.2 MAR 1.19 1.19 0.00 Comm. Today Last Nikkei225 10,323.0 448.75 JUN 1.15 1.14 0.01 Brent spot 112.5 valid field( Oslo SEP 1.16 1.14 0.02 Brent 1m 111.0 111.1 Stockholm 526.45 649.99 DEC 1.17 1.16 0.01 Spot gold 0.0 1662.5 Copenhagen Sources to all tables and graphics: Reuters and DNB Markets

sw ap 1.75 1.75 2.25

% -0.2% -0.7% -0.5% -0.1% -0.5% 0.0% 0.5% -0.1% 0.3%

Morning Report
27.12.2012
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