Morning Report

28.02.2013

Brighter mood
NOK & 3m NIBOR 7.60 2.00 1.95 7.50 1.90 7.40 1.85 7.30 1.80 7.20 1.75 31-Jan 14-Feb 28-Feb
EURNOK 3m(rha)

Despite political chaos Italy had no trouble obtaining funding yesterday. Since yesterday morning market optimism has rebounded. Bernankes signals to the Congress helped allay fears of imminent liquidation of QE3, and Italy's debt auction went better than feared. Stock markets rose and the euro strengthened broadly, and particularly against the dollar. The yen is weakening, and the Nikkei index has risen by nearly 3 percent today. Bond investors were apparently not scared off by political chaos in Italy. Yesterday's Italian debt auction of 10-year government bonds went better than feared. The auction was met with solid interest, and the maximum amount of 4 billion euros was sold. The yield ended at 4.83 percent. This is higher than the Italians had to pay in a similar auction by the end of January (4.17 percent), but far from disturbingly high. Now the question is whether consumers and businesses will be scared. Euro zone confidence barometer, ESI, rose for the fourth consecutive month in February, this time by 1.6 p to 91.1. The survey was conducted before the election in Italy. The increase was greatest in Germany, but the French index also rose. There was also some improvement in the Spanish, Italian, Portuguese and Greek index. Consumer confidence rose, and industry and services sector had become more optimistic. Solid figures from the US yesterday: Industrial durable goods orders fell by 5.2 per cent m/m in January, but this was due to a reversal in the aircraft and defense orders. Without these, orders rose by 10.2 percent. Capital goods (excluding aircraft and defense) rose by 6.3 percent, which could be a sign that business investment has started on a brisk note in 2013. Pending home sales, the index based on signed contracts for sales of existing homes, is a good leading indicator of actual sales. In January, it rose by 4.5 per cent, well above expectations (1.5 percent, according to Reuters). The Japanese government today nominated Haruhiko Kuroda to the job as governor after Shirakawa, who will leave on 19 March. Kuroda, who is president in the Asian Development Bank, is a supporter of using aggressive monetary policy instruments in the struggle for growth and inflation. He wants to increase purchases of government bonds and other domestic securities, and has proposed a two-year time horizon for achieving the goal of 2 percent inflation. According to Statistics Norway's Labour Force Survey (LFS), there has been a clear negative turnaround in the labor market in recent months. Employment growth has disappeared and unemployment has increased markedly. In the period from November to January, employment declined by 11 000 compared to the previous three-month period. The unemployment rate rose further to 3.6 percent, the highest level since November 2011. This is far higher than Norges Bank's forecast in October, which was a stable unemployment rate at just 3 percent until 2015. We are somewhat skeptical regarding the abrupt turnaround. Firstly, key figures from the Norwegian economy have signaled that activity has slowed down in recent months, but there are no signs of stagnation or decline. Secondly, registered unemployment at the labor offices has shown a completely different trend. Unemployment dropped further in January, to the lowest level seen since March 2009. When there is discrepancy between the two statistics Norges Bank tends to put more weight on registered unemployment. However: In anticipation of Friday's registered unemployment figures for February, we conclude that the Norwegian labor market is weakening. Coming up today: We expect retail sales in Sweden and Norway to have risen by 0.5 percent in January. Consensus is 0.1 and 0.5, respectively (Reuters). We expect Norges Banks daily FX purchases to the Government Pension Fund to remain at 300 million NOK in March. Euro zone core inflation in January is expected to have remained at 1.6 percent in January. US initial claims are expected to edge down from 362' to 360'. Chicago PMI is expected to edge down slightly. kjersti.haugland@dnb.no

Norsk 10y sov.

2.8 2.6 2.4 2.2 2.0 1.8 31-Jan
rente

150

100 50
14-Feb 0 28-Feb
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

+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) 09:00 Norway LFS Unemployment 10:00 EMU Sentiment Index 13:30 USA Durable Orders Todays key economic events (GMT) 09:00 Norway Retail sales 09:00 Norway Norge Banks FX purch. 14:45 US Chicago PMI

As of Dec Feb Jan As of Jan March Feb

Unit % Index m/m % Unit m/m % Mill/day Index

Prior 3.5 89.2 4.3 Prior 0.2 300 55.6

Poll 3.4 89.8 -4.4 Poll 0.5 54.5

Actual 3.6 91.1 -5.2 DNB 0.5 300

Morning Report
28.02.2013

3m LIBOR
0.20 0.15 0.10 0.05 0.00 31-Jan
EUR

14-Feb

0.31 0.30 0.30 0.29 0.29 0.28 0.28 28-Feb

USD(rha)

NOK & 3m NIBOR 7.60 2.00 1.95 7.50 1.90 7.40 1.85 7.30 1.80 7.20 1.75 31-Jan 14-Feb 28-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 91.82 1.3062 0.8647 7.4571 8.4391 1.2182 7.4520 5.7040 6.22 88.38 99.95 8.618 6.118

Today 92.45 1.3144 0.8666 7.4576 8.4570 1.2219 7.4810 5.6947 6.16 88.55 100.37 8.640 6.129

Spot rates and forecasts In 1m May-13 Aug-13 Feb-14 FX 0700 0.7 90 92 94 97 AUD 0.6 1.30 1.32 1.34 1.37 CAD 0.2 0.84 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.2 8.50 8.45 8.45 8.60 RUB 0.3 1.22 1.22 1.25 1.27 GBP 0.4 7.30 7.30 7.35 7.40 HKD -0.2 5.62 5.53 5.49 5.40 KWD -0.9 6.24 6.01 5.84 5.57 LTL 0.2 85.9 86.4 87.0 86.0 LVL 0.4 98.0 98.0 98.7 99.3 NZD 0.2 8.69 8.59 8.55 8.51 SEK 0.2 598.36 598.36 588.00 582.68 SGD

USD NOK 1.027 5.845 1.024 5.560 0.930 612.200 19.501 29.183 30.530 18.640 1.517 8.633 7.756 0.734 0.283 20.096 2.626 2.167 0.533 10.681 0.831 4.730 6.433 88.458 1.236 4.605

US dollar

5.8 5.6 5.4 5.2

31-Jan 14-Feb
USDNOK

1.40 1.35 1.30 1.25 28-Feb

EURUSD(rha)

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

Prior 1.76 1.90 2.03 2.27 2.27 2.63 2.97 3.31

Last 1.74 1.88 2.01 2.25 2.23 2.59 2.91 3.25

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

Prior 1.17 1.22 1.30 1.57 1.50 1.81 2.08 2.35

Interest rates Last USD 1.17 1m 1.22 3m 1.30 6m 1.57 12m 1.51 3y 1.80 5y 2.07 7y 2.33 10y

Prior 0.20 0.29 0.46 0.75 0.50 0.90 1.37 1.94

Last 0.20 0.29 0.46 0.75 0.50 0.91 1.41 1.95

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

Prior 0.06 0.13 0.24 0.45 0.60 0.95 1.32 1.77

Last 0.06 0.13 0.24 0.45 0.61 0.95 1.32 1.76

Japanese yen

96.0 94.0 92.0 90.0 88.0

31-Jan
USDJ PY

7.0 6.0
14-Feb

Norw ay Prior NST475 96.05 10y yld 2.44 - US spread 0.57 3m nibor 1.85 1.85 1.85

5.0 28-Feb
JPYNOK(rha)

Norw ay May-13 Aug-13 Feb-14

Governm ent bonds Last SEK Prior Last US Prior 96.40 10y 113.74 113.75 10y 101.14 2.40 10y yld 1.87 1.87 10y yld 1.87 0.51 - US spread -0.01 -0.03 30y yld 3.06 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 May-13 Aug-13 Feb-14 1.20 1.20 1.20 2.25 2.25 2.50 May-13 Aug-13 Feb-14 0.35 0.35 0.35

Last Germany Prior Last 100.95 10y 100.41 100.32 1.89 10y yld 1.46 1.47 3.10 - US spread -0.42 -0.43 10y sw ap 2.00 2.00 2.25 3m euribor 0.25 0.25 0.25 10y sw ap 1.75 1.75 2.00

Germany May-13 Aug-13 Feb-14

SEKNOK & CHFNOK 89 88 87 86 85 84 83 31-Jan 14-Feb

SEKNOK CHFNOK(rha)

6.2 6.1 6.0 5.9 5.8 28-Feb

Equities 14200 13700 13200 12700 12200 31-Jan 14-Feb

Dow J.I.

480 475 470 465 460 455 28-Feb

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 1.96 1.98 2 19.06.2013 0.30 Last 91.74 91.61 2.23 2.25 1 18.09.2013 0.55 Oil price: (Ldn,cl) 1m 1.68 1.68 0 18.12.2013 0.80 SPOT 111.78 111.87 1.50 1.52 2 15.05.2015 2.21 Gold price 27.02.2013 PM 1.72 1.68 -4 19.05.2017 4.22 AM: 1590.5 1604.3 1.96 1.91 -5 22.05.2019 6.23 Equities Today 0700 % last 2.42 2.40 -2 24.05.2023 10.24 Dow Jones 14075.37 1.3% 2.44 2.40 -4 24.05.2023 10.24 Nasdaq C. 3162.26 1.0% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6325.88 0.9% 1.91 2.02 1m 1.83 1.74 Eurostoxx50 2611.89 1.6% 1.89 2.00 3m 1.97 1.88 DAX 7675.83 1.0% 1.88 2.00 6m 2.08 2.01 Nikkei 225 11559.36 2.7% 1.90 2.03 12m 2.28 2.25 OSEBX 472.55 0.2% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
28.02.2013
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