Morning Report

04.02.2013

NOK strongest ever

The key figures released on Friday came out positive and contributed to increased market optimism. Stock markets and interest rates on US Treasury bonds rose. The Norwegian krone is again at record strong levels and the central bank may be forced to push planned interest rate increases further out in time. The Scandinavian key figures released on Friday were positive news. According to the Norwegian Labour and Welfare Administration (NAV) gross unemployment declined by 650 persons from December to January and the registered unemployment rate was 2.7 per cent. These figures show a more positive development in the labour market than the LFS study released earlier last week. NAVs figure are well in line with Norges Banks estimates of a stable unemployment rate at 2.5 per cent this year. According to the PMI index, industrial activity is rising in Norway. The index came out at 50.5, slightly better than expected (50.3 according to Reuters). The subindexes for new orders and production pulled up, while the employment index declined this month. The situation for Swedish manufacturers also seems to improve. The Manufacturing PMI rose from 44.6 in December to 49.2 in January. The outcome was far better than expected (46.1) The index has been on a positive trend since October and this months increase was the largest in one month since mid- 2009. However the level is still well below its historical average and also below the 50 mark, which indicates contraction. Employment increased by 157 in the US in January. The November and December figures were revised up by 86 and 41 respectively. The unemployment rate increased, from 7.8 to 7.9 per cent, while consensus had expected the unemployment rate to remain stable. The figures were more or less in line with expectations. The figures will not have a direct impact on the current central bank monetary policy. Federal Reserve needs to see a more substantial improvement in the labour market before they will cut back on its asset purchases. We are not there yet. The labour market figures contributed to rising stock markets on Friday. Dow Jones ended above 14000 for the first time since October 2007. The yield on 10 year US Treasury bonds increased and is now about 2.05 per cent. The euro hit a 14 months high against the dollar and a 33 month high versus the yen on Friday. The Norwegian krone has been relatively stable versus the EUR, just above 7.40 since mid-January. However the NOK has strengthened versus other currencies and the import-weighted NOK (I-44) is at its strongest levels ever. This is the rate Norges Bank look at when they consider monetary policies. In mid-January the central bank deputy governor, Jan Qvigstad, said the NOK was stronger than expected and that this could impact the interest rate. The NOK is now even stronger. There does therefore seem to be a fair chance that Norges Bank will push planned interest rate increases further out in time. If the NOK strengthens further, they may be forced to cut the interest rate. There are not many key figures on the agenda today. The most important figure seems to be December factory orders in the US. Another event that may gain some attention today is the new forecast for US government debt released by the Congressional Budget Office. Looking ahead the highlights of this week seem to be the monetary policy meetings in the ECB and BoE on Thursday. In January the ECB held its key policy rate unchanged at 0.75 per cent. And there were no indications of interest rate cuts, unless the economic development should disappoint again. Since then the key figures have on general been more on the positive side and in a survey conducted by Reuters none of the respondents expect the interest rate to be cut at this weeks meeting. The interest rate is expected to be kept on hold at least through July 2014. There was however 30 out of 54 persons that said the OMT programme would be pressed into action this year. The OMT programme was announced by the ECB in September last year and allows the ECB to purchase unlimited amounts of government bonds from countries that have been guaranteed emergency loans from the European authorities. Spain was expected to be the first country to trigger the first bout of ECB purchases. Other candidates are Ireland and Portugal. The British interest rate is also expected to be kept on current low levels in the foreseeable future. There is more uncertainty regarding whether the BoE will have to restart asset purchases. No such decision expected this week, but 40 per cent of the respondents in a recent Reuters poll, expect a new round of QE during 2013. The performance of the British economy is very poor and if the economic development should disappoint going forward, more asset purchases does in our view seem likely. [email protected] Yesterdays key economic events (GMT) As of Unit Prior Poll Actual 2.7 157 7.9

Norsk 10y sov.

21-Jan

100 80 60 40 20 0 04-Feb
Diff(bp,rha)

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

09:00 Norway Reg. unemployment Jan % 13:30 USA Employment Jan 1000 13:30 USA Unemployment Jan % As of Unit Todays key economic events (GMT) 10:00 EMU PPI Dec m/m% 15:00 USA Factory orders Dec % USA CBO forecasts on US government debt

2.4 2.7 196r 160 7.8 7.8 Prior Poll DNB -0.2 0.0 -0.2 1.0

Morning Report
04.02.2013

3m LIBOR
0.20 0.15 0.10 0.05 0.00 07-Jan
EUR

21-Jan

0.31 0.31 0.30 0.30 0.29 04-Feb

NOK & 3m NIBOR 7.60 1.90 7.50 1.85 7.40 1.80 7.30 7.20 1.75 07-Jan 21-Jan 04-Feb
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 92.17 1.3620 0.8584 7.4609 8.6526 1.2392 7.4387 5.4641 5.93 86.06 99.73 8.672 6.008

Today 92.66 1.3634 0.8684 7.4604 8.6195 1.2389 7.4480 5.4631 5.90 86.52 99.85 8.579 6.015

Spot rates and forecasts In 1m Apr-13 Jul-13 Jan-14 FX 0700 0.5 88 90 91 93 AUD 0.1 1.33 1.32 1.36 1.37 CAD 1.2 0.82 0.81 0.85 0.86 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.4 8.65 8.65 8.60 8.70 RUB 0.0 1.20 1.20 1.20 1.20 GBP 0.1 7.30 7.25 7.25 7.40 HKD 0.0 5.49 5.49 5.33 5.40 KWD -0.5 6.24 6.10 5.86 5.81 LTL 0.5 84.4 83.8 84.3 85.1 LVL 0.1 98.0 97.3 97.3 99.3 NZD -1.1 8.90 8.95 8.53 8.60 SEK 0.1 608.33 604.17 604.17 592.00 SGD

USD NOK 1.044 5.701 0.997 5.476 0.909 601.124 18.839 28.992 29.912 18.260 1.570 8.575 7.756 0.704 0.281 19.426 2.532 2.157 0.514 10.631 0.847 4.624 6.320 86.422 1.237 4.414

US dollar

5.7 5.6 5.5 5.4 5.3

1.40 1.35 1.30 1.25 04-Feb

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

Prior 1.83 1.87 2.00 2.24 2.44 2.81 3.07 3.39

Last 1.84 1.88 2.02 2.26 2.42 2.78 3.06 3.38

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

Prior 1.13 1.18 1.28 1.52 1.55 1.90 2.17 2.42

Interest rates Last USD 1.13 1m 1.18 3m 1.28 6m 1.52 12m 1.56 3y 1.90 5y 2.18 7y 2.44 10y

Prior 0.20 0.30 0.47 0.78 0.56 0.99 1.48 2.04

Last 0.20 0.30 0.47 0.78 0.53 1.00 1.51 2.06

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

Prior 0.06 0.15 0.28 0.50 0.85 1.19 1.52 1.91

Last 0.06 0.16 0.28 0.51 0.81 1.16 1.49 1.90 Last 98.19 1.70 -0.35 10y sw ap 1.75 1.75 2.00

Japanese yen

95.0 90.0
85.0

8.0 7.0

Norw ay Prior NST475 94.50 10y yld 2.62 - US spread 0.61 3m nibor 1.85 1.85 1.85

Norw ay

80.0
07-Jan
USDJ PY

21-Jan

6.0 04-Feb
JPYNOK(rha)

Governm ent bonds Last SEK Prior Last US Prior 95.25 10y 112.71 112.71 10y 96.59 2.53 10y yld 1.99 1.99 10y yld 2.01 0.48 - US spread -0.02 -0.05 30y yld 3.19 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Apr-13 Jul-13 Jan-14 1.10 1.10 1.10 2.25 2.25 2.50 Apr-13 Jul-13 Jan-14 0.35 0.35 0.35

Last Germany Prior 96.28 10y 98.32 2.04 10y yld 1.68 3.24 - US spread -0.33 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25

Germany Apr-13 Jul-13 Jan-14

Apr-13 Jul-13 Jan-14

SEKNOK & CHFNOK 87 86 85 84 83 07-Jan 21-Jan

6.1 6.0 5.9 5.8 04-Feb

Equities 14200 13700 13200 12700 12200 07-Jan 21-Jan

480 470 460 450 440 04-Feb

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 2.53 2.55 2 19.06.2013 0.37 Last 90.43 90.49 1.99 2.00 1 18.09.2013 0.62 Oil price: (Ldn,cl) 1m 1.97 1.73 -24 18.12.2013 0.87 SPOT 117.24 116.50 1.73 1.70 -3 15.05.2015 2.27 Gold price 01.02.2013 PM 2.00 1.96 -4 19.05.2017 4.29 AM: 1664.8 1669.0 2.17 2.12 -5 22.05.2019 6.30 Equities Today 0700 % last 2.60 2.57 -3 24.05.2023 10.30 Dow Jones 14009.79 1.1% 2.62 2.53 -9 24.05.2023 10.30 Nasdaq C. 3179.10 1.2% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6347.24 1.1% 1.89 2.01 1m 1.90 1.84 Eurostoxx50 2710.08 0.3% 1.91 2.06 3m 2.03 1.88 DAX 7833.39 0.7% 2.00 2.15 6m 2.10 2.02 Nikkei 225 11260.35 0.6% 2.09 2.24 12m 2.28 2.26 OSEBX 470.69 1.1% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
04.02.2013
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