Morning Report

22.02.2012

Brighter in China
NOK & 3m NIBOR 8.00 7.80 7.60 7.40
3m ra.

Chinese manufacturing purchasing managers reports stronger production growth in February.

3.20 2.90 2.60 2.30

12-Jan 1-Feb 21-Feb

EURNOK

During yesterday's session global stock markets fell slightly, while there was little change in long government bond yields. In FX markets the yen continued to weaken, which pleases the Japanese government (and exporters). The effect of the surprising expansion of quantitative easing by Bank of Japan last week has had significant effects. The euro has weakened against the dollar. The Greek bailout, which was signed last morning, had been priced into the markets beforehand. Also, much uncertainty remains regarding the deal. The package will be subject to a vote in national parliaments, and the ability (and willingness) of Greek authorities to implement its fiscal measures is much questioned. The degree to which private investors will participate in the actual restructuring is also uncertain. The bondholders' negotiators have agreed to a 53.5 per cent haircut on Greek debt, which means that they lose up to 74 per cent of the net present value of their bonds. The Greek Parliament is about to vote over a law proposal that would introduce a so-called "collective action clause" (CAC). If this is adopted, all bondholders will be forced to participate in the bond swap if 2/3 agrees to participate. In case the CAS is triggered, there is reason to believe that this will be defined as a default, thus triggering the honouring of CDSs (default insurances). The new and easier Greek borrowing terms has increased the pressure on Portuguese politicians to achieve something of the same. After having lost access to market financing in the spring last year, Portugal received aid from the Troika (ECB/EU/IMF) amounting to 78 billion euros, but had to implement tough measures to boost growth potential and reduce its debt burden in return. We expect that Portugal's package will prove to be insufficient, and that the country will be next in line to renegotiate its deal. Last night Asian stock markets rose, likely due to the preliminary monthly HSBC report on Chinese manufacturing purchasing managers (PMI). PMI rose by 0.9 points from the previous month to 49.7. The index has been on a downward trend since November 2010 and fell below 50 as early as July 2011. 6 out of 8 readings since then have been below 50. Such a level should, in principle, indicate falling production, but in an emerging economy like China the index needs to be interpreted differently. According to HSBC, a level of 48 corresponds with annual growth in industrial production of 12-13 per cent. The February PMI displayed an increase in most sub-indices, including production and employment (both above 50). The new orders index was unchanged, due to a fall in export orders. More easings should be expected to be launched by Chinese authorities. According to Reuters a majority of analysts expects that China lowers reserve requirements for banks with a further 200 basis points during the year. The pressure on Finance Minister George Osbourne to ease the amount of fiscal tightening in the budget which will be released on 21 March became stronger after January figures for UK government finances was released yesterday. Public finances are improving more than assumed in the Office of Budget Responsibility's analyses. This is due to higher tax receipts and lower borrowing in the public sector, where the latter indicates that public consumption growth has come down - as planned. While the struggling British economy could certainly need less growth drain from the public sector, Moody's decision earlier in February to put the British AAA credit rating on the list of countries with a negative outlook will probably put a stop to such plans. Minutes from the February meeting in BoE is released today. The decision to increase asset purchases by 50 billion pounds is expected to have been unanimous. Also coming up today: Euro zone PMI indices in February and manufacturing orders in December are expected to edge up. Norwegian unemployment figures are expected to remain flat at 3.4 percent, while the Swedish (non-adjusted) is expected to rise from 7.1 percent in December to 7.9 percent in January. US existing home sales are expected to increase in January. kjersti.haugland@dnb.no

SEK & 3m STIBOR 9.0 8.9 8.8 8.7 12-Jan 1-Feb

3m ra.

2.70 2.60 2.50 2.40 2.30 21-Feb

EURSEK

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Yesterday's key economic events (GMT) 13:30 USA Chicago Fed activity 15:00 EMU Consumer confidence 02:30 China Flash PMI, manuf. (HSBC) Todays key economic events (GMT) 08:58 EMU Composite PMI 09:00 Norway LFS Unemployment 15:00 USA Home sales

As of Jan Feb Feb As of Feb Dec Jan

Unit Index Index Index Unit Index % mill

Prior 0.5r -20.7 48.8 Prior 50.4 3.4 4.6

Poll

Poll 50.6 3.4 4.7

Actual 0.2 -20.2 49.7 DNB 3.4

Morning Report
22.02.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 124 120 116 112 108 104 100 12-Jan 1-Feb
NOK TWI ra.

102 100 98 96 94 92 21-Feb

$/b

EUR vs GBP & CHF 1.25 1.20 1.15 1.10

GBP r.a

0.85 0.84 0.83 0.82 0.81

CHF

12-Jan 1-Feb 21-Feb

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

Prior 79.73 1.324 0.839 1.208 7.537 8.809 7.436 5.693 7.145 0.856 8.981 6.656 8.351 1.170 10.504

Last 80.01 1.326 0.839 1.208 7.512 8.796 7.436 5.670 7.089 0.855 8.959 6.638 8.307 1.173 10.488

% 0.4% 0.1% 0.0% 0.0% -0.3% -0.1% 0.0% -0.4% -0.8% -0.2% -0.2% -0.3% -0.5% 0.3% -0.2%

In 1 m ...3 m 77 77 1.30 1.30 0.83 0.83 1.23 1.23 7.60 7.75 8.90 9.20 7.45 7.45 5.85 5.96 7.59 7.74 0.85 0.84 9.2 9.3 6.85 7.08 5.27 5.45 1.17 1.19 10.72 11.08

...6 m ...12 m 80 85 1.35 1.40 0.85 0.87 1.23 1.30 7.65 7.65 9.00 9.00 7.45 7.45 5.67 5.46 7.08 6.43 0.85 0.85 9.0 8.8 6.67 6.43 5.33 5.46 1.18 1.18 10.59 10.34

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

USD 1.0683 0.9959 0.9112 18.77 5.6126 1.5801 7.7551 123.90 0.2781 2.6054 0.5274 0.8354 3.1531 1.2567 29.7469

% 0.14% -0.09% -0.08% -0.19% -0.08% 0.10% 0.01% -0.08% -0.02% -0.12% -0.09% 0.14% -0.19% -0.05% -0.11%

EURSEK & OMXS 9.0 8.9 8.8 8.7 12-Jan 1-Feb

OMXS ra. EURSEK

550 500 450 400 350 21-Feb

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

NIB OR Prior 2.26 2.67 3.03 3.25 2.99 3.26 3.49 3.71

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.25 2.07 2.06 0.54 2.67 2.37 2.36 0.96 3.02 2.53 2.53 1.29 3.24 2.62 2.63 1.47 3.00 2.01 2.03 1.27 3.26 2.17 2.19 1.64 3.50 2.38 2.40 2.01 3.71 2.55 2.58 2.38

Last 0.53 0.95 1.28 1.47 1.28 1.65 2.01 2.38

USD LIBOR Prior 0.25 0.49 0.75 0.90 0.73 1.19 1.66 2.13

Last 0.25 0.49 0.75 0.90 0.75 1.20 1.68 2.15

Gov. Bonds, 10y 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

12-Jan 1-Feb 21-Feb

10y 10y yield vs bund

NORWAY Prior Last 114.85 111.10 2.41 2.40 0.44 0.41

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 114.323 114.28 100.143 100.11 99.453125 1.95 1.95 1.97 1.99 2.06 -0.02 -0.04 0.09

Last 99.33 2.09 0.10

JPY and DowJones 80 14 79 13 78 12 77 11 76 10 75 12-Jan 1-Feb 21-Feb

USDJPY ra. DowJones, 1000

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.65 3.50 2.40 2.25 1.05 2.50 2.55 3.75 2.20 2.50 1.05 2.75 2.60 4.25 2.00 3.00 1.05 3.25

US 3m libor 10y swap 0.50 2.25 0.50 2.50 0.50 3.00

USD and gold 1.42 1900 1.38 1800 1.34 1700 1.30 1600 1.26 1500 12-Jan 1-Feb 21-Feb
EURUSD ra. Gold

FRA NOK MAR JUN SEP DEC FRA SEK MAR JUN SEP DEC

3m 2.63 2.50 2.51 2.54 3m 2.28 2.02 1.84 1.80

Prior 2.63 2.50 2.51 2.54 Prior 2.28 2.02 1.84 1.79

chg 0.00 0.00 0.00 0.00 chg 0.00 0.00 0.01 0.01

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 93.95 - 0.33 Dow Jones 12,965.7 : SEK 116.45 - 0.11 Nasdaq 2,948.6 : 104.20 0.08 FTSE100 5,928.2 -0.3% EUR USD 79.05 - 0.06 Eurostoxx50 2,541.6 -0.3% GBP 81.00 Dax 6,908.2 -0.6% Comm. Today Last Nikkei225 9,554.0 0.0% Brent spot 122.4 122.4 Oslo 425.10 -0.2% Brent 1m 121.6 121.7 Stockholm 506.82 -0.5% Spot gold 0.0 1748.0 Copenhagen 586.85 -0.7% Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
22.02.2012
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