Morning Report

16.07.2013

Markets brushing off Portuguese risk

NOK & 3m NIBOR
8.10

7.90
7.70

7.50 18-Jun

02-Jul

1.90 1.80 1.70 1.60 1.50 16-Jul

3m (rha)

Political turmoil in Portugal seems to have a negligible effect on the markets. In the US retail sales disappointed in June. Market movements remained small yesterday. European and US stocks were marginally stronger, while Asian equities are moderately down this morning. The euro seems to be holding up quite well against most currencies, and is about 0.5 percent stronger versus the yen due to a rise in USDJPY. Fixed income remains broadly unchanged, but US 10 year treasury yields are down about 5 bp. The markets seem to be brushing off the ongoing turmoil in Portugal which in a worst-case scenario may force the government to resign. These days the authorities are trying to get in place a pact between the government parties and the opposition where all parties are supposed to bind themselves to the austerity measures which are imposed by the Troika. According to the Financial Times, the authorities have set a deadline at July 21 to get in place an agreement. The heat was intensified about two weeks ago, when two senior ministers resigned. The political uncertainty led to a sudden rise in interest rates, and last Friday the 10 year sovereign yield topped at 7.8 percent. The tensions in Portugal seem to be a consequence of the government no longer being willing to accept the strict austerity measures that are imposed by the Troika, which is having adverse effects on an already weak economy. The rescue package involves that the government to reduce tens of thousands of state workers and cut spending by 4.7 bn euro. Also, according the plan, Portugal will exit the bailout program in 2014. This, however, is hanging in a thin thread if the government fails on the austerity measures. A failure could set of a domino effect. In such scenario the government is likely to be forced to apply for a new rescue package, where the IMF might not be one of the lenders. This, in turn, puts additional pressure on European politicians. An unsuccessful agreement is likely to lead to a default which in turn will force through a restructuring of Portuguese debt and renewed tension in the financial markets. In an economy with unemployment at 17.6 percent, a fragile banking sector and GDP which is dropping, such scenario should be avoided at all cost. Retail sales in the US were disappointing in June. Total sales increased by 0.4 percent m/m, against an expected increase of 0.8 percent. Total sales, however, were lifted by a 1.8 percent increase in auto sales. After excluding these and other volatile components (sales ex. autos, gas, building materials), sales were up by a mere 0.1 percent m/m, a lot weaker than we had expected from consumption at the beginning of the year. Combined in Q2 core sales were up 2.8 percent annualized, which is 0.7 percentage points weaker than growth in Q1. Thus, retail sales indicate that growth in private consumption the most important source of growth in GDP in the US is likely to weaken in Q2 from an already weak Q1. This, however, should be temporary, as underlying conditions are gradually improving. The labour market is continuing to progress, and housing prices are increasing rapidly. Both of these should eventually lead to a more healthy development in household consumption as well. Today the Riksbank publish the minutes from its monetary policy meeting on July 3. As we know, the repo rate was kept unchanged, while the interest rate path was adjusted only marginally. In the meanwhile, both Ekholm and newly-appointed deputy governor Martin Flodn wanted to reduce the rate. Prior to the meeting there was also some speculation whether the other newly appointed deputy governor, Cecilia Skingsley, wanted to cut the repo rate. We also get the ZEW-index from Germany, which is expected to show a small increase to 39.6 in July. In addition, the UK, the US and the euro zone will publish new inflation data. While i nflation is expected to remain moderate in the US and the euro zone, inflation in the UK is expected to increase to 3.0 percent in June, considerably higher than BoEs target at 2.0 percent. From the US we also get the NAHB-index, which is expected to remain unchanged at 52 in July. ole.kjennerud@dnb.no

EURNOK

Norw ay: 10y Gov't Bond

2.8 2.6 2.4 2.2 2.0 18-Jun
Rate

02-Jul

115 105 95 85 75 65 16-Jul

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

Yesterdays key economic events (GMT) As of Unit Prior 02:00 China GDP Q2 y/y % 7.7 12:30 USA Retail sales (ex. vehicles) Jun m/m % 0.3 12:30 USA Empire state (NY Fed) Jul Index 7.8 As of Unit Prior Todays key economic events (GMT) 07:30 Sweden Riksbanken publish minutes from MPC meeting on July 3 12:30 USA CPI, ex. Food/energy Jun y/y % 1.7 14:00 USA NAHB-index Jul Index 52

Poll 7.5 0.4 5.0 Poll 1.6 51

Actual 7.5 0.0 9.5 DNB

Morning Report
16.07.2013

3m LIBOR
0.160 0.150 0.140 0.130 0.120 0.110 18-Jun
EUR

02-Jul

0.28 0.28 0.27 0.27 0.26 16-Jul

USD (rha)

Oil price & NOK TWI

98 96 94 92 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 99.28 1.3075 0.8647 7.4583 8.7246 1.2370 7.9260 6.0640 6.11 90.92 106.31 9.171 6.410

Today 99.76 1.3074 0.8654 7.4579 8.7228 1.2397 7.9380 6.0719 6.09 91.05 106.46 9.173 6.402

Spot rates and forecasts In 1m Oct-13 Jan-14 Jul-14 FX 0700 0.5 98 102 107 110 AUD 0.0 1.30 1.26 1.30 1.32 CAD 0.1 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.0 8.55 8.45 8.50 8.60 RUB 0.2 1.24 1.25 1.27 1.30 GBP 0.2 7.80 7.70 7.70 7.70 HKD 0.1 6.00 6.11 5.92 5.83 KWD -0.4 6.12 5.99 5.54 5.30 LTL 0.1 91.2 91.1 90.6 89.5 LVL 0.1 104.7 103.4 103.4 103.4 NZD 0.0 9.18 9.06 8.95 8.85 SEK -0.1 629.03 616.00 606.30 592.31 SGD

USD NOK 0.916 5.561 1.043 5.817 0.948 640.075 19.878 30.534 32.593 18.622 1.511 9.170 7.758 0.782 0.286 21.247 2.641 2.298 0.537 11.293 0.783 4.749 6.671 90.984 1.262 4.811

18-Jun

02-Jul

95 16-Jul
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6 5.4

18-Jun 02-Jul
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 16-Jul

EURUSD(rha)

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

Prior 1.59 1.68 1.75 1.92 2.12 2.54 2.91 3.24

Last 1.61 1.69 1.76 1.92 2.13 2.58 2.95 3.28

Interest rates SEK Prior Last USD 1m 1.11 1.11 1m 3m 1.20 1.20 3m 6m 1.28 1.28 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.63 1.63 3y 5y 2.03 2.03 5y 7y 2.32 2.32 7y 10y 2.58 2.58 10y

Prior 0.19 0.27 0.40 0.69 0.79 1.55 2.16 2.77

Last 0.19 0.27 0.40 0.69 0.81 1.56 2.18 2.76

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

Prior 0.07 0.14 0.25 0.45 0.68 1.09 1.45 1.88

Last 0.07 0.14 0.25 0.45 0.69 1.10 1.47 1.90 Last 99.35 1.57 -0.98 10y sw ap 1.75 1.75 2.00

105.0 100.0
95.0

Japanese yen

90.0 18-Jun
USDJ PY

02-Jul

7.0 6.5 6.0 5.5 5.0 16-Jul

Norw ay Prior NST475 95.20 10y yld 2.56 - US spread -0.03 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 94.48 10y 94.29 94.29 10y 92.73 2.64 10y yld 2.12 2.12 10y yld 2.59 0.10 - US spread -0.47 -0.42 30y yld 3.63 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 93.09 10y 99.51 2.55 10y yld 1.55 3.60 - US spread -1.04 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

92 91 90 89 88 87 6.6

6.4
6.2

18-Jun
SEKNOK

02-Jul

6.0 16-Jul
CHFNOK (rha)

Equities 15700 15200 14700 14200 13700 18-Jun 02-Jul

Dow Jones

500 480 460 440 420 16-Jul

Os lo (rha)

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.45 1.41 -4 18.12.2013 0.42 Last 96.28 96.19 1.46 1.45 -1 19.03.2014 0.67 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.92 SPOT 108.91 108.86 1.39 1.45 6 15.05.2015 1.83 Gold price 15.07.2013 PM 1.70 1.76 6 19.05.2017 3.84 AM: 1279.8 1284.8 2.56 2.62 6 24.05.2023 9.86 Equities Today 0700 % last 2.56 2.62 6 24.05.2023 9.86 Dow Jones 15484.26 0.1% 2.56 2.64 9 24.05.2023 9.86 Nasdaq C. 3607.49 0.2% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6586.11 0.6% 1.69 1.78 1m 1.73 1.61 Eurostoxx50 2686.69 0.4% 1.70 1.81 3m 1.82 1.69 DAX 8234.81 0.3% 1.72 1.85 6m 1.87 1.76 Nikkei 225 14578.95 0.5% 1.77 1.93 12m 2.00 1.92 OSEBX 494.26 0.5% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
16.07.2013
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Morning Report
16.07.2013

3m LIBOR
0.160 0.150 0.140 0.130 0.120 0.110 18-Jun
EUR

02-Jul

0.28 0.28 0.27 0.27 0.26 16-Jul

USD (rha)

Oil price & NOK TWI

98 96 94 92 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 99.28 1.3075 0.8647 7.4583 8.7246 1.2370 7.9260 6.0640 6.11 90.92 106.31 9.171 6.410

Today 99.76 1.3074 0.8654 7.4579 8.7228 1.2397 7.9380 6.0719 6.09 91.05 106.46 9.173 6.402

Spot rates and forecasts In 1m Oct-13 Jan-14 Jul-14 FX 0700 0.5 98 102 107 110 AUD 0.0 1.30 1.26 1.30 1.32 CAD 0.1 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.0 8.55 8.45 8.50 8.60 RUB 0.2 1.24 1.25 1.27 1.30 GBP 0.2 7.80 7.70 7.70 7.70 HKD 0.1 6.00 6.11 5.92 5.83 KWD -0.4 6.12 5.99 5.54 5.30 LTL 0.1 91.2 91.1 90.6 89.5 LVL 0.1 104.7 103.4 103.4 103.4 NZD 0.0 9.18 9.06 8.95 8.85 SEK -0.1 629.03 616.00 606.30 592.31 SGD

USD NOK 0.916 5.561 1.043 5.817 0.948 640.075 19.878 30.534 32.593 18.622 1.511 9.170 7.758 0.782 0.286 21.247 2.641 2.298 0.537 11.293 0.783 4.749 6.671 90.984 1.262 4.811

18-Jun

02-Jul

95 16-Jul
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6 5.4

18-Jun 02-Jul
USDNOK

1.35 1.33 1.31 1.29 1.27 1.25 16-Jul

EURUSD(rha)

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

Prior 1.59 1.68 1.75 1.92 2.12 2.54 2.91 3.24

Last 1.61 1.69 1.76 1.92 2.13 2.58 2.95 3.28

Interest rates SEK Prior Last USD 1m 1.11 1.11 1m 3m 1.20 1.20 3m 6m 1.28 1.28 6m 12m Invalid Invalid RIC(s): RIC. STISEK1YDFI= 12m 3y 1.63 1.63 3y 5y 2.03 2.03 5y 7y 2.32 2.32 7y 10y 2.58 2.58 10y

Prior 0.19 0.27 0.40 0.69 0.79 1.55 2.16 2.77

Last 0.19 0.27 0.40 0.69 0.81 1.56 2.18 2.76

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

Prior 0.07 0.14 0.25 0.45 0.68 1.09 1.45 1.88

Last 0.07 0.14 0.25 0.45 0.69 1.10 1.47 1.90 Last 99.35 1.57 -0.98 10y sw ap 1.75 1.75 2.00

105.0 100.0
95.0

Japanese yen

90.0 18-Jun
USDJ PY

02-Jul

7.0 6.5 6.0 5.5 5.0 16-Jul

Norw ay Prior NST475 95.20 10y yld 2.56 - US spread -0.03 3m nibor 1.55 1.55 1.55

Norw ay Oct-13 Jan-14 Jul-14

Governm ent bonds Last SEK Prior Last US Prior 94.48 10y 94.29 94.29 10y 92.73 2.64 10y yld 2.12 2.12 10y yld 2.59 0.10 - US spread -0.47 -0.42 30y yld 3.63 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.00 3.00 3.25 Oct-13 Jan-14 Jul-14 1.25 1.25 1.25 2.25 2.25 2.50 Oct-13 Jan-14 Jul-14 0.30 0.35 0.35

Last Germany Prior 93.09 10y 99.51 2.55 10y yld 1.55 3.60 - US spread -1.04 10y sw ap 2.25 2.25 2.50 3m euribor 0.20 0.25 0.20

Germany Oct-13 Jan-14 Jul-14

JPYNOK(rha)

SEKNOK & CHFNOK

92 91 90 89 88 87 6.6

6.4
6.2

18-Jun
SEKNOK

02-Jul

6.0 16-Jul
CHFNOK (rha)

Equities 15700 15200 14700 14200 13700 18-Jun 02-Jul

Dow Jones

500 480 460 440 420 16-Jul

Os lo (rha)

NOK sov. NST21 NST22 NST23 NST471 NST472 NST475 NST475 NST475 NOK FRA SEP DEC MAR JUN

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.45 1.41 -4 18.12.2013 0.42 Last 96.28 96.19 1.46 1.45 -1 19.03.2014 0.67 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.92 SPOT 108.91 108.86 1.39 1.45 6 15.05.2015 1.83 Gold price 15.07.2013 PM 1.70 1.76 6 19.05.2017 3.84 AM: 1279.8 1284.8 2.56 2.62 6 24.05.2023 9.86 Equities Today 0700 % last 2.56 2.62 6 24.05.2023 9.86 Dow Jones 15484.26 0.1% 2.56 2.64 9 24.05.2023 9.86 Nasdaq C. 3607.49 0.2% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6586.11 0.6% 1.69 1.78 1m 1.73 1.61 Eurostoxx50 2686.69 0.4% 1.70 1.81 3m 1.82 1.69 DAX 8234.81 0.3% 1.72 1.85 6m 1.87 1.76 Nikkei 225 14578.95 0.5% 1.77 1.93 12m 2.00 1.92 OSEBX 494.26 0.5% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets