Morning Report

22.05.2013

Bernankes day in Congress

NOK & 3m NIBOR
7.70 7.60 7.50 7.40 7.30 1.90

Market participants are hoping for QE3 signals today.

1.80
1.70

Global equity markets added further gains yesterday, and today Nikkei has risen by 1.8 percent. A slightly weaker yen may help to explain this. The Norwegian krone has strengthened on a broad basis, following Governor Olsens comments yesterday. The dollar is trending weaker and moderate inflation figures have led to depreciation of the pound by 0.9 percent against the euro. As expected Bank of Japan did not introduce further monetary policy measures today. The Bank unanimously stuck to its plan to double the money supply to achieve the goal of two percent inflation within two years. One member, Kiuchi, proposed to make the 2 percent target a medium-/long term goal, instead committing to intense monetary easing in the next two years. His proposal was rejected by 8 to 1 vote. The press release did not mention explicitly the recent surge in Japanese long-term government bond yields, but states that several indicators point to higher inflation expectations. The central bank now sees a recovery in the Japanese economy. Todays foreign trade statistics show that exports grew by 3.8 percent y/y in April (less than expected), while imports rose by 9.4 per cent. Hence, the yen depreciations effect through more expensive imports is more evident than the effect of cheaper exports at the moment. The Federal Reserve takes the center stage today. At 2PM Bernanke testifies in the Congress. Here we will be looking for fresh assessments of the economy and strategy, which may be compared with the assessments in the minutes of the monetary policy meeting on 1 May that are published in the evening. The press release was perceived as more dovish than the preceding one, since it pointed out that both up- and downscaling of the current QE3 scheme is possible, depending on how the economy and inflation develops. We expect the economy to be strong enough for QE3 to be gradually scaled down starting this autumn. UK inflation was unexpectedly moderate in April. CPI rose by 2.4 percent y/y, down from 2.8 percent in March. Core CPI, which excludes energy, food and beverages, rose by 2.0 percent, four tenths less than in March. Bank of England has decided to look through a period of higher inflation, since a stagnant economy is unlikely to give rise to second-round effects through higher demands in wage negotiations and higher profit margins. Today minutes from the monetary policy meeting on 9 May is published. At the meeting, neither the interest rate nor the securities purchase program was changed. In the previous three meetings 3 of 9 members, including Governor King, have voted in favor of increasing purchases by 25 billion. This was probably the case in May as well. In about six weeks Canadian Mark Carney takes over as Governor, and then we should expect changes. We expect him to introduce forward guidance, perhaps by using threshold values such as unemployment (a la Fed). Governor Olsen contributed to a NOK appreciation after yesterday's hearing before the Finance Committee, when he was quoted as saying " We have strong reason to stick to the current rate path now, thereby lowering expectations about an imminent cut. The import-weighted NOK (I44) is currently only 0.3 percent weaker than Norges Bank Q2 estimate. The hearing did not offer any new signals regarding Norges Banks monetary policy assessments. Today Deputy Governor Qvigstad speaks in Stavanger. Swedish unemployment is slightly higher than the Riksbank anticipated in its April update. Both in March and April, the seasonally adjusted unemployment rate has been 8.4 percent, four tenths higher than in January and two tenths above the Riksbank's 2013 projection. In isolation, this increases the likelihood of a rate cut in July. The details of the labor force survey reveal, however, a less gloomy picture. Annual employment growth rose by three tenths to 0.8 percent in April. Other releases today: US existing home sales is expected to have increased by 1.5 per cent m/m in April. UK retail sales are expected to have remained stable in April, after a decline in March. Tomorrow Chinas flash manufacturing PMI for May is released. In April the PMI edged down to 50.4. kjersti.haugland@dnb.no

17-Apr

03-May

1.60 22-May
3m (rha)

EURNOK

Norw ay: 10y Gov't Bond

2.3 2.2 2.2 2.1 2.1 2.0 17-Apr
Rate

95

85
75 03-May

65 22-May
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

+ 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 64 76 30 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

Tuesdays key economic events (GMT) As of 08:30 Sweden Unemployment Apr 09:30 UK CPI Apr 23:30 Japan Exports Apr As of Todays key economic events (GMT) 08:30 UK Minutes BoE meeting 14:00 US Existing home sales Apr 14:00 US Bernanke testifies in Congress 18:00 US FOMC minutes

Unit % na y/y % y/y % Unit mill

Prior 8.8 2.8 1.1 Prior 4.920

Poll 8.7 2.6 5.9 Poll 4.990

Actual 8.7 2.4 3.8 DNB

Morning Report
22.05.2013

3m LIBOR
0.135 0.130 0.125 0.120 0.115 0.110 0.105 0.28 0.28 0.27 0.27 0.27 22-May
USD (rha)

17-Apr
EUR

03-May

Oil price & NOK TWI

95 94 93 92 91 90 110

105
100

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 102.51 1.2891 0.8453 7.4520 8.5664 1.2482 7.5162 5.8326 5.69 87.82 100.92 8.899 6.026

Today 102.63 1.2913 0.8526 7.4533 8.5480 1.2542 7.4814 5.7983 5.65 87.60 100.49 8.781 5.971

Spot rates and forecasts In 1m Aug-13 Nov-13 May-14 FX 0700 0.1 102 105 107 110 AUD 0.2 1.27 1.26 1.30 1.32 CAD 0.9 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.2 8.55 8.45 8.50 8.60 RUB 0.5 1.24 1.25 1.27 1.30 GBP -0.5 7.55 7.50 7.45 7.40 HKD -0.6 5.94 5.95 5.73 5.61 KWD -0.7 5.83 5.67 5.36 5.10 LTL -0.3 88.3 88.8 87.6 86.0 LVL -0.4 101.3 100.7 100.0 99.3 NZD -1.3 8.88 8.82 8.66 8.51 SEK -0.9 608.87 600.00 586.61 569.23 SGD

USD NOK 0.977 5.659 1.028 5.636 0.971 596.456 20.174 28.717 31.255 18.536 1.514 8.774 7.761 0.746 0.286 20.232 2.674 2.166 0.542 10.685 0.814 4.716 6.620 87.520 1.259 4.601

17-Apr

03-May

95 22-May
USD/b (rha)

NOK TWI

US dollar 6.0 5.9 5.8 5.7 5.6

17-Apr 03-May
USDNOK

1.33 1.31 1.29 1.27 1.25 22-May

EURUSD(rha)

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

Prior 1.68 1.75 1.85 2.02 2.00 2.29 2.64 3.00

Last 1.63 1.74 1.83 2.01 2.02 2.35 2.69 3.07

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

Prior 1.15 1.20 1.25 1.36 1.64 1.92 2.22

Interest rates Last USD 1.15 1m 1.20 3m 1.25 6m #N/A 12m 1.36 3y 1.65 5y 1.93 7y 2.23 10y

Prior 0.20 0.27 0.42 0.69 0.52 0.97 1.46 2.04

Last 0.20 0.27 0.42 0.69 0.51 0.96 1.47 2.05

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

Prior 0.06 0.12 0.20 0.37 0.46 0.79 1.14 1.60

Last 0.06 0.12 0.20 0.38 0.49 0.83 1.18 1.64

104.0 102.0 100.0 98.0 96.0 94.0

Japanese yen

17-Apr
USDJ PY

03-May

7.0 6.5 6.0 5.5 5.0 22-May

Norw ay Prior NST475 99.15 10y yld 2.10 - US spread 0.13 3m nibor 1.80 1.80 1.80

Norw ay Aug-13 Nov-13 May-14

Governm ent bonds Last SEK Prior Last US Prior 98.30 10y 96.74 96.74 10y 98.06 2.19 10y yld 1.85 1.85 10y yld 1.96 0.26 - US spread -0.12 -0.08 30y yld 3.17 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Aug-13 Nov-13 May-14 1.20 1.20 1.45 2.25 2.25 2.50 Aug-13 Nov-13 May-14 0.35 0.35 0.35

Last Germany Prior Last 98.38 10y 101.12 101.03 1.93 10y yld 1.38 1.39 3.13 - US spread -0.59 -0.54 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

Germany Aug-13 Nov-13 May-14

JPYNOK(rha)

SEKNOK & CHFNOK

91 90 89 88 87 6.3 6.2 6.1 6.0 5.9 5.8 22-May
CHFNOK (rha)

17-Apr

03-May

SEKNOK

Equities
15700 15200 14700 14200 13700 17-Apr
Dow Jones

500 480 460 440 420 03May 22May

Os lo (rha)

NOK sov. NST20 NST21 NST22 NST471 NST472 NST475 NST475 NST475 NOK FRA JUN SEP DEC MAR

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.45 1.50 5 18.09.2013 0.33 Last 91.43 91.93 1.48 1.36 -12 18.12.2013 0.58 Oil price: (Ldn,cl) 1m 1.46 1.46 0 19.03.2014 0.82 SPOT 102.88 103.56 1.05 1.17 12 15.05.2015 1.98 Gold price 21.05.2013 PM 1.32 1.42 10 19.05.2017 3.99 AM: 1354.8 1360.8 0.00 0.00 0 24.05.2023 10.01 Equities Today 0700 % last 2.11 2.17 6 24.05.2023 10.01 Dow Jones 15387.58 0.3% 2.10 2.19 10 24.05.2023 10.01 Nasdaq C. 3502.12 0.2% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6803.87 0.7% 1.78 1.86 1m 1.78 1.63 Eurostoxx50 2821.65 -0.1% 1.74 1.84 3m 1.85 1.74 DAX 8472.20 0.2% 1.74 1.85 6m 1.90 1.83 Nikkei 225 15652.13 1.8% 1.76 1.87 12m 2.07 2.01 OSEBX 494.36 1.0% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
22.05.2013
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