Morning Report

18.03.2013

Cyprus will be yet another test

NOK & 3m NIBOR 7.60 1.95 1.90 7.50 1.85 7.40 1.80 7.30 1.75 7.20 1.70 18-Feb 04-Mar 18-Mar
EURNOK 3m(rha)

Norsk 10y sov.

2.8 2.6 2.4 2.2 2.0 1.8 18-Feb
rente

150

Over the weekend, it was announced that the finance ministers of the euro area have agreed on a rescue package of 10 billion euros to Cyprus, or 55 percent of the country's GDP . Since much of the reason that Cyprus now stands on the brink of ruin are big losses in the banking sector, the European politicians demanded that the Cypriot politicians agrees to a one-off tax on deposits. For deposits over 100 000 euros, the tax amounts to 9.9 percent, and 6.7 percent below this. It will contribute 5.8 billion euros. In addition, corporate taxes are increased by 2.5 percentage points to 12.5 percent. The President of Cyprus agrees with this, but the pressure from the finance ministers of the euro area and the ECB is said to have been intense. A necessary ratification of the new law in parliament has been postponed from Sunday to Monday, but have to be in place before the Cypriot banks open on Tuesday after a bank holiday on Monday. According to President Anastasiades, the ECB will stop the supply of liquidity to one of the country's banks on Tuesday unless a rescue package was put in place.

100 There were long queues at the ATMs after the news, and Cypriot bank accounts are frozen for overseas 50
04-Mar 0 18-Mar
Diff(bp,rha)

Headquarter 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 Magnus Vie Sundal

+47 03000

transfers until a solution is in place. The euro weakened immediately when the Asian markets opened today, and it is expected that interest rates in other European countries' government debt will rise when these markets open. This will be a test of whether the ECB's promise of unlimited purchases of government securities and the measures implemented in other vulnerable euro countries is enough to reassure the markets, as the requirements are widely regarded as very strict. And if depositors in the peripheral euro countries fear the same in the future may happen with their deposit, we will probably see an escalation of the crisis, with capital flight, weaker bank balances, higher interest rates, a weaker euro and search for safe havens. Manufacturing sector in the US surprised positively in February and manufacturing production rose 0.7 percent m/m, after stagnating in January. Production of durable goods rose 1.7 percent, reversing the fall in January. Sentiment indices point to continued growth in March, suggesting that the first quarter could be a useful quarter despite the "Fiscal Cliff" and sequestration. However, there is little evidence that uncontrolled inflation will force the Fed to end QE. In February, CPI and core inflation was 2.0 percent y/y, and is thus on the Fed's inflation target. The increase in consumer prices from 1.6 percent in January was mainly due to a rise in petrol prices which now is reversed. Nor in the euro area is inflation an obstacle to the central bank's current monetary policy. CPI in the euro area fell from 2.0 percent y/y in January to 1.8 percent in February, and is thus under 2.0 percent for the first time since November 2010. Inflation has fallen since last autumn, and inflation pressure in the euro area is clearly subdued. Core inflation fell to 1.4 percent. Todays calendar is thin. Early today, trade balance figures for the euro area are released. PMI export orders have picked up in recent months, indicating that the export decline may slow in the first quarter. However, the euro has strengthened this year, and the trade surplus is therefore expected to decline from 11.7 billion euros in December to 3.0 billion euros in January. Later, the NAHB's housing market index is released. The U.S. housing market has gradually improved. But despite the fact that house prices rose in the last eleven months of last year, the NAHB index disappointed in January and February. From February to March the index is expected to increase marginally. Later in the week, there are two highlights that stand out on data calendar. Wednesday, the Bank of England publishes the Minutes of the monetary policy meeting on 7 March . At the meeting in February, three of the members of the MPC voted for an increase of the quantitative easing, including Governor Mervyn King. Neither the rate or amounts of securities were changed at the meeting in March, but the Minutes will be scrutinized for signs of if or when the purchases will be increased. Later on Wednesday, the Fed announces the decision of its interest rate meeting. And this time, with a press conference and new forecasts from the central bank. Minutes of the previous meeting surprised by suggesting an earlier end to QE than previously thought. As we have mentioned several times, however, the Minutes includes the opinions of the non-voting members of the FOMC. Nevertheless, it will be interesting to see Fed's view of the labor market. magne.ostnor@dnb.no

+ 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 24 16 91 23

Yesterdays key economic events (GMT) 10:00 EZ Core Inflation 12:30 USA CPI ex food/energy 13:15 USA Industrial Production Todays key economic events (GMT) 10:00 EZ Trade balance 14:00 USA NAHB housing index

As of Feb Feb Feb As of Jan Mar

Unit y/y % m/m % m/m % Unit Bln Index

Prior 1.3 0.3 -0.1 Prior 11.7 46

Poll 1.4 0.2 0.4 Poll 3.0 47

Actual 1.4 0.2 0.7 DNB

Morning Report
18.03.2013

3m LIBOR
0.15 0.14 0.13 0.12 0.11 18-Feb
EUR

04-Mar

0.30 0.29 0.29 0.28 0.28 0.27 18-Mar

USD(rha)

NOK & 3m NIBOR 7.60 1.95 1.90 7.50 1.85 7.40 1.80 7.30 1.75 7.20 1.70 18-Feb 04-Mar 18-Mar
EURNOK 3m(rha)

FX 0700 USD/JPY EUR/USD EUR/GBP EUR/DKK EUR/SEK EUR/CHF EUR/NOK USD/NOK JPY/NOK SEK/NOK DKK/NOK GBP/NOK CHF/NOK

Last 96.12 1.3017 0.8629 7.4578 8.3633 1.2332 7.5350 5.7913 6.02 90.20 101.06 8.736 6.114

Today 94.60 1.2909 0.8558 7.4549 8.3320 1.2192 7.4980 5.8073 6.14 89.99 100.54 8.761 6.152

Spot rates and forecasts In 1m Jun-13 Sep-13 Mar-14 FX 0700 -1.6 95 92 95 100 AUD -0.8 1.30 1.32 1.34 1.37 CAD -0.8 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.4 8.40 8.40 8.45 8.60 RUB -1.1 1.22 1.22 1.25 1.27 GBP -0.5 7.45 7.40 7.40 7.40 HKD 0.3 5.73 5.61 5.52 5.40 KWD 1.9 6.03 6.09 5.81 5.40 LTL -0.2 88.7 88.1 87.6 86.0 LVL -0.5 100.0 99.3 99.3 99.3 NZD 0.3 8.76 8.71 8.60 8.51 SEK 0.6 610.66 606.56 592.00 582.68 SGD

USD NOK 1.037 6.019 1.024 5.671 0.944 614.851 19.850 29.252 30.890 18.797 1.508 8.758 7.761 0.748 0.285 20.405 2.674 2.171 0.543 10.689 0.824 4.785 6.453 89.976 1.251 4.641

US dollar

6.0 5.8 5.6 5.4 5.2 18-Feb

1.35 1.30
04-Mar

1.25 18-Mar
EURUSD(rha)

Interest rates NOK Prior Last SEK Prior Last USD Prior Last EUR Prior 1m 1.75 1.77 1m 1.16 1.16 1m 0.20 0.20 1m 0.06 3m 1.80 1.82 3m 1.23 1.23 3m 0.28 0.28 3m 0.13 6m 1.89 1.88 6m 1.31 1.31 6m 0.44 0.44 6m 0.23 The The 12m time time series series 2.10 server server 2.10 does does not not 12m have have enough enough resources resources12m to to complete complete 0.73 the the request request. 0.73 for: STISEK1YDFI= 12m 0.43 3y 2.08 2.06 3y 1.54 1.54 3y 0.54 0.51 3y 0.57 The5y time series 2.43server 2.42 does not 5yhave enough resources 1.84 to 5ycomplete 1.01 the request. 0.97 5y 0.92 7y 2.79 2.78 7y 2.11 2.12 7y 1.51 1.48 7y 1.29 10y 3.17 3.17 10y 2.38 2.38 10y 2.10 2.07 10y 1.73 Governm ent bonds Last SEK Prior Last US Prior 97.90 10y 112.96 113.42 10y 99.67 2.23 10y yld 1.95 1.90 10y yld 2.03 0.31 - US spread -0.09 -0.02 30y yld 3.24 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jun-13 Sep-13 Mar-14 1.20 1.20 1.20 2.25 2.25 2.50 Jun-13 Sep-13 Mar-14 0.35 0.35 0.35

Last 0.06 0.13 0.22 0.43 0.56 0.90 1.27 1.72

USDNOK

Japanese yen

100.0 95.0
90.0

7.0 6.0
04-Mar

Norw ay Prior NST475 97.78 10y yld 2.25 - US spread 0.21 3m nibor 1.85 1.85 1.85

Last Germany Prior Last 100.69 10y 100.22 101.17 1.92 10y yld 1.48 1.37 3.14 - US spread -0.56 -0.55 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25 10y sw ap 1.75 1.75 2.00

85.0 18-Feb
USDJ PY

5.0 18-Mar
JPYNOK(rha)

Norw ay Jun-13 Sep-13 Mar-14

Germany Jun-13 Sep-13 Mar-14

SEKNOK & CHFNOK 91 90 89 88 87 86 85 84 83 18-Feb 04-Mar

SEKNOK CHFNOK(rha)

6.2 6.1 6.0 5.9 18-Mar

Equities 14700 14200 13700 13200 12700 12200 18-Feb 04-Mar

Dow J.I.

485 480 475 470 465 460 18-Mar

Os lo(rha)

NOK sov. NST19 NST20 NST21 NST471 NST472 NST473 NST475 NST475 NOK FRA MAR JUN SEP DEC

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 2.34 2.37 3 19.06.2013 0.25 Last 92.39 92.53 2.46 2.47 1 18.09.2013 0.50 Oil price: (Ldn,cl) 1m 1.61 1.61 -1 18.12.2013 0.75 SPOT 108.38 108.43 1.31 1.27 -4 15.05.2015 2.16 Gold price 15.03.2013 PM 1.47 1.45 -2 19.05.2017 4.17 AM: 1586.0 1595.5 1.73 1.70 -3 22.05.2019 6.18 Equities Today 0700 % last 2.25 2.24 -1 24.05.2023 10.19 Dow Jones 14514.11 -0.2% 2.25 2.23 -1 24.05.2023 10.19 Nasdaq C. 3249.07 -0.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6489.65 -0.6% 1.82 1.85 1m 1.78 1.77 Eurostoxx50 2725.72 -0.7% 1.73 1.85 3m 1.85 1.82 DAX 8042.85 -0.2% 1.74 1.83 6m 1.95 1.88 Nikkei 225 12220.63 -2.7% 1.78 1.89 12m 2.13 2.10 OSEBX 480.45 -0.3% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
18.03.2013
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