Morning Report

19.07.2013

G-20 to focus on emerging markets

NOK & 3m NIBOR
8.10

7.90
7.70

7.50 21-Jun

05-Jul

1.90 1.80 1.70 1.60 1.50 19-Jul

3m (rha)

The G-20 meeting this weekend is likely to focus on the increased uncertainty in the financial markets emerging economies. Norges Banks lending showed that households loan demand was broadly unchanged in Q2, which was as expected. In Q3 banks are expecting unchanged household loan demand. According to the survey, banks credit standards for households were about unchanged in Q2. Admittedly, banks lending margins increased significantly in Q2 , in response to higher lending rates. The increase was higher than banks had expected. Still, the banks are expecting lending margins to continue to increase in Q3. The survey also showed that credit demand by non-financial enterprises increased somewhat less than expected. In Q3 banks are expecting credit demand by non-financial enterprises to be unchanged. All in all, the survey didnt offer much surprise to anyone. The report indicates that aggregate loan demand growth will remain broadly unchanged in Q3, and that banks will keep credit standards unchanged. This might indicate that credit growth, as measured by the credit indicator C2, will remain stable in the coming months . Households credit growth has averaged at 7.4 percent so far this year, somewhat higher than growth in household income. The high credit growth and the subsequent growth in household debt is something Norges Bank for a longer period has been concerned about. However, in the autumn of 2013 there will be introduced a countercyclical capital buffer for Norwegian banks, with effect from the second half of 2014. The buffer is to be set by the Ministry of Finance, based on advice from Norges Bank. The lending survey for Q2 is likely to not have any effect on Norges Banks judgment of high this capital buffer should be. In the UK retail sales increased by 0.2 percent from May to June. The modest increase came after a 2.1 percent rise in the preceding month. Thus, retail sales expanded by a solid 3.6 percent annualized in Q2, up from 2.1 percent in Q1. It therefore seems likely that household spending will give a modest boost to growth in GDP in Q2. The positive development in retail sales is also, quite satisfactory, part of a broader trend where incoming data from the UK has continued to surprise positively in the last two months. Earlier this week we saw a welcoming drop in unemployment in June, and before that we ve seen house prices accelerating. Combined this should despite low real wage growth support household spending, and in turn GDP growth, going forward. Incoming data from the US yesterday were mostly positive. Philly Fed, a regional manufacturing index, increased by 7.3 points to 19.8 in July. Also the expectations index surged, as it increased from 41.5 in June to 58.8 in July. Both indices are now at their highest points since earl 2011, and indicate that the ISM, when published in a couple of weeks, might increase somewhat in July. In addition, initial claims fell more than expected last week, as claims fell from 358 to 334, while it was expected a drop to 345. The positive mood in the financial markets continued yesterday. Equities globally strengthened, with both European and US bourses closing 0.5 to 1.0 percent up. The exception was Oslo Brs, which fell by 0.6 percent. The krone strengthened on a broad basis. EURNOK is currently traded at 7.84, down 0.4 percent since yesterday morning. Also the Swedish krona strengthened, and EURSEK is currently traded at 8.61. It is likely to be a rather calm day in todays markets. There are no incoming data of importance, and the only happening which may have some effect on the markets, is this weekends meeting between the finance ministers and central bankers in the G-20. The meeting is likely to cover financial safety nets, as the possibility of a somewhat less aggressive monetary policy in the Fed has raised concerns about the development in financial markets in emerging economies. Since Ben Bernanke in late May signaled that the Fed might scale back its asset purchases later this year emerging market currencies have suffered. The Indian rupee has plunged by 8 percent versus the dollar, while the Brazilian real has suffered a loss close to 9.5 percent. Combined with rising borrowing costs the increased FX volatility is having adverse effects on economic growth in these and other emerging markets. The challenge now for political leaders will be to develop financial safety nets which can mitigate the effects of the outgoing capital flows from emerging markets. Communication will be important, but it is just as crucial to get in place currency-swap agreements to deal with surging borrowing costs. ole.kjennerud@dnb.no Yesterdays key economic events (GMT) As of Unit 08:00 Norway Norges Banks lending survey Q2 2013 08:30 UK Retail sales Jun m/m % 12:30 USA Initial claims Wk 28 1000 As of Unit Todays key economic events (GMT) Global G-20 meeting Prior 2.1 358 Prior Poll 0.2 345 Poll Actual 0.2 334 DNB

EURNOK

Norw ay: 10y Gov't Bond

2.8 2.6 2.4 2.2 2.0 21-Jun
Rate

125

105
85 05-Jul

65 19-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

Morning Report
19.07.2013

3m LIBOR
0.150 0.145 0.140 0.135 0.130 0.125 21-Jun
EUR

05-Jul

0.28 0.28 0.27 0.27 0.26 19-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 100.13 1.3097 0.8628 7.4586 8.6295 1.2354 7.8705 6.0090 6.00 91.20 105.56 9.124 6.372

Today 100.12 1.3138 0.8624 7.4573 8.6091 1.2376 7.8440 5.9690 5.96 91.13 105.15 9.094 6.339

Spot rates and forecasts In 1m Oct-13 Jan-14 Jul-14 FX 0700 0.0 98 102 107 110 AUD 0.3 1.30 1.26 1.30 1.32 CAD 0.0 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 0.2 1.24 1.25 1.27 1.30 GBP -0.3 7.80 7.70 7.70 7.70 HKD -0.7 6.00 6.11 5.92 5.83 KWD -0.6 6.12 5.99 5.54 5.30 LTL -0.1 91.2 91.1 90.6 89.5 LVL -0.4 104.7 103.4 103.4 103.4 NZD -0.3 9.18 9.06 8.95 8.85 SEK -0.5 629.03 616.00 606.30 592.31 SGD

USD NOK 0.919 5.482 1.037 5.756 0.942 633.663 19.731 30.250 32.473 18.380 1.523 9.093 7.758 0.769 0.285 20.920 2.628 2.271 0.535 11.165 0.791 4.721 6.552 91.090 1.267 4.711

21-Jun

05-Jul

95 19-Jul
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6 5.4

21-Jun 05-Jul
USDNOK

1.33 1.31 1.29 1.27 1.25 19-Jul

EURUSD(rha)

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

Prior 1.62 1.70 1.78 1.93 2.12 2.56 2.93 3.26

Last 1.60 1.70 1.77 1.93 2.12 2.55 2.91 3.24

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

Prior 1.10 1.20 1.28 1.59 1.97 2.26 2.52

Interest rates Last USD 1.10 1m 1.20 3m 1.28 6m #N/A 12m 1.59 3y 1.97 5y 2.26 7y 2.52 10y

Prior 0.19 0.27 0.40 0.68 0.74 1.46 2.08 2.67

Last 0.19 0.27 0.40 0.68 0.75 1.48 2.11 2.71

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

Prior 0.07 0.14 0.25 0.45 0.64 1.06 1.42 1.86

Last 0.07 0.14 0.25 0.45 0.62 1.03 1.40 1.84 Last 99.84 1.52 -1.00 10y sw ap 1.75 1.75 2.00

102.0 100.0 98.0 96.0 94.0

Japanese yen

21-Jun
USDJ PY

05-Jul

7.0 6.5 6.0 5.5 5.0 19-Jul

Norw ay Prior NST475 94.24 10y yld 2.67 - US spread 0.19 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 94.91 10y 94.80 94.80 10y 93.61 2.59 10y yld 2.07 2.07 10y yld 2.49 0.08 - US spread -0.42 -0.45 30y yld 3.57 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 93.34 10y 99.62 2.52 10y yld 1.54 3.61 - US spread -0.94 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

21-Jun
SEKNOK

05-Jul

6.0 19-Jul
CHFNOK (rha)

Equities 15700 15200 14700 14200 13700 21-Jun 05-Jul

Dow Jones

500 480 460 440 420 19-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 1.49 1.52 3 18.12.2013 0.42 Last 95.36 95.61 1.40 1.42 2 19.03.2014 0.67 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.92 SPOT 109.87 108.76 1.49 1.45 -4 15.05.2015 1.82 Gold price 18.07.2013 PM 1.80 1.73 -7 19.05.2017 3.84 AM: 1297.3 1283.3 2.66 2.60 -6 24.05.2023 9.85 Equities Today 0700 % last 2.66 2.60 -6 24.05.2023 9.85 Dow Jones 15548.54 0.5% 2.67 2.59 -8 24.05.2023 9.85 Nasdaq C. 3611.28 0.0% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6571.93 0.9% 1.70 1.79 1m 1.75 1.60 Eurostoxx50 2681.88 0.6% 1.70 1.82 3m 1.82 1.70 DAX 8254.72 0.7% 1.71 1.85 6m 1.87 1.77 Nikkei 225 14583.43 -1.5% 1.76 1.92 12m 2.00 1.93 OSEBX 491.75 -0.7% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
19.07.2013
IMPORTANT/DISCLAIMER
This note (the Note) must be seen as marketing material and not as an investment recommendation within the meaning of the N orwegian Securities Trading Act of 2007 paragraph 3-10 and the Norwegian Securities Trading Regulation 2007/06/29 no. 876. The Note has been prepared by DNB Markets, a division of DNB Bank ASA, a Norwegian bank organized under the laws of the Kingdom of Norway (the Bank), for information purposes only. The Note shall not be used for any unlawful or unauthorized purposes. The Bank, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (individually, each a DNB Party; collectively, DNB Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Note. DNB Parties are not responsible for any errors or omissions, regardless of the cause, nor for the results obtained from the use of the Note, nor for the security or maintenance of any data input by the user. The Note is provided on an as is basis. DNB PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE NOTES FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE NOTE WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall DNB Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with any use of the Note, even if advised of the possibility of such damages. Any opinions expressed herein reflect the Banks judgment at the time the Note was prepared and DNB Parties ass ume no obligation to update the Note in any form or format. The Note should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. No DNB Party is acting as fiduciary or investment advisor in connection with the dissemination of the Note. While the Note is based on information obtained from public sources that the Bank believes to be reliable, no DNB Party has performed an audit of, nor accepts any duty of due diligence or independent verification of, any information it receives. Confidentiality rules and internal rules restrict the exchange of information between different parts of the Bank and this may prevent employees of DNB Markets who are preparing the Note from utilizing or being aware of information available in DNB Markets/the Bank which may be relevant to the recipients of the Note. The Note is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. Distribution of material like the Note is in certain jurisdictions restricted by law. Persons in possession of the Note should seek further guidance regarding such restrictions before distributing the Note. The Note is for clients only, and not for publication, and has been prepared for information purposes only by DNB Markets - a division of DNB Bank ASA registered in Norway with registration number NO 984 851 006 (the Register of Business Enterprises) under supervision of the Financial Supervisory Authority of Norway (Finanstilsynet), The Monetary Authority of Singapore, and on a limited basis by the Financial Conduct Authority and the Prudential Regulation Authority of the UK, and the Financial Supervisory Authority of Sweden. Details about the extent of our regulation by local authorities outside Norway are available from us on request. Additional information for clients in Singapore The Note has been distributed by the Singapore branch of DNB Bank ASA. It is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of any product referred to in the Note, taking into account your specific financial objectives, financial situation or particular needs before making a commitment to purchase any such product. You have received a copy of the Note because you have been classified either as an accredited investor, an expert investor or as an institutional investor, as these terms have been defined under Singapores Financial Advisers Act (Cap. 110) (FAA) and/or the Financial Advisers Regulations (FAR). The Singapore branch of DNB Bank ASA is a financial adviser exempt from licensing under the FAA but is otherwise subject to the legal requirements of the FAA and of the FAR. By virtue of your status as an accredited investor or as an expert investor, the Singapore branch of DNB Bank ASA is, in respect of certain of its dealings with you or services rendered to you, exempt from having to comply with certain regulatory requirements of the FAA and FAR, including without limitation, sections 25, 27 and 36 of the FAA. Section 25 of the FAA requires a financial adviser to disclose material information concerning designated investment products which are recommended by the financial adviser to you as the client. Section 27 of the FAA requires a financial adviser to have a reasonable basis for making investment recommendations to you as the client. Section 36 of the FAA requires a financial adviser to include, within any circular or written communications in which he makes recommendations concerning securities, a statement of the nature of any interest which the financial adviser (and any person connected or associated with the financial adviser) might have in the securities. Please contact the Singapore branch of DNB Bank ASA at +65 6212 0753 in respect of any matters arising from, or in connection with, the Note. The Note is intended for and is to be circulated only to persons who are classified as an accredited investor, an expert investor or an institutional investor. If you are not an accredited investor, an expert investor or an institutional investor, please contact the Singapore branch of DNB Bank ASA at +65 6212 0753. We, the DNB group, our associates, officers and/or employees may have interests in any products referred to in the Note by acting in various roles including as distributor, holder of principal positions, adviser or lender. We, the DNB group, our associates, officers and/or employees may receive fees, brokerage or commissions for acting in those capacities. In addition, we, the DNB group, our associates, officers and/or employees may buy or sell products as principal or agent and may effect transactions which are not consistent with the information set out in the Note. Additional Information, including for Recipients in the In the United States: The Note does not constitute an offer to sell or buy a security and does not include information, opinions, or recommendations with respect to securities of an issuer or an analysis of a security or an issuer; rather, it is a market letter, as the term is defined in NASD Rule 2211.

Morning Report
19.07.2013

3m LIBOR
0.150 0.145 0.140 0.135 0.130 0.125 21-Jun
EUR

05-Jul

0.28 0.28 0.27 0.27 0.26 19-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 100.13 1.3097 0.8628 7.4586 8.6295 1.2354 7.8705 6.0090 6.00 91.20 105.56 9.124 6.372

Today 100.12 1.3138 0.8624 7.4573 8.6091 1.2376 7.8440 5.9690 5.96 91.13 105.15 9.094 6.339

Spot rates and forecasts In 1m Oct-13 Jan-14 Jul-14 FX 0700 0.0 98 102 107 110 AUD 0.3 1.30 1.26 1.30 1.32 CAD 0.0 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 0.2 1.24 1.25 1.27 1.30 GBP -0.3 7.80 7.70 7.70 7.70 HKD -0.7 6.00 6.11 5.92 5.83 KWD -0.6 6.12 5.99 5.54 5.30 LTL -0.1 91.2 91.1 90.6 89.5 LVL -0.4 104.7 103.4 103.4 103.4 NZD -0.3 9.18 9.06 8.95 8.85 SEK -0.5 629.03 616.00 606.30 592.31 SGD

USD NOK 0.919 5.482 1.037 5.756 0.942 633.663 19.731 30.250 32.473 18.380 1.523 9.093 7.758 0.769 0.285 20.920 2.628 2.271 0.535 11.165 0.791 4.721 6.552 91.090 1.267 4.711

21-Jun

05-Jul

95 19-Jul
USD/b (rha)

NOK TWI

US dollar 6.4 6.2 6.0 5.8 5.6 5.4

21-Jun 05-Jul
USDNOK

1.33 1.31 1.29 1.27 1.25 19-Jul

EURUSD(rha)

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

Prior 1.62 1.70 1.78 1.93 2.12 2.56 2.93 3.26

Last 1.60 1.70 1.77 1.93 2.12 2.55 2.91 3.24

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

Prior 1.10 1.20 1.28 1.59 1.97 2.26 2.52

Interest rates Last USD 1.10 1m 1.20 3m 1.28 6m #N/A 12m 1.59 3y 1.97 5y 2.26 7y 2.52 10y

Prior 0.19 0.27 0.40 0.68 0.74 1.46 2.08 2.67

Last 0.19 0.27 0.40 0.68 0.75 1.48 2.11 2.71

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

Prior 0.07 0.14 0.25 0.45 0.64 1.06 1.42 1.86

Last 0.07 0.14 0.25 0.45 0.62 1.03 1.40 1.84 Last 99.84 1.52 -1.00 10y sw ap 1.75 1.75 2.00

102.0 100.0 98.0 96.0 94.0

Japanese yen

21-Jun
USDJ PY

05-Jul

7.0 6.5 6.0 5.5 5.0 19-Jul

Norw ay Prior NST475 94.24 10y yld 2.67 - US spread 0.19 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 94.91 10y 94.80 94.80 10y 93.61 2.59 10y yld 2.07 2.07 10y yld 2.49 0.08 - US spread -0.42 -0.45 30y yld 3.57 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 93.34 10y 99.62 2.52 10y yld 1.54 3.61 - US spread -0.94 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

21-Jun
SEKNOK

05-Jul

6.0 19-Jul
CHFNOK (rha)

Equities 15700 15200 14700 14200 13700 21-Jun 05-Jul

Dow Jones

500 480 460 440 420 19-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 1.49 1.52 3 18.12.2013 0.42 Last 95.36 95.61 1.40 1.42 2 19.03.2014 0.67 Oil price: (Ldn,cl) 1m 1.52 1.52 0 18.06.2014 0.92 SPOT 109.87 108.76 1.49 1.45 -4 15.05.2015 1.82 Gold price 18.07.2013 PM 1.80 1.73 -7 19.05.2017 3.84 AM: 1297.3 1283.3 2.66 2.60 -6 24.05.2023 9.85 Equities Today 0700 % last 2.66 2.60 -6 24.05.2023 9.85 Dow Jones 15548.54 0.5% 2.67 2.59 -8 24.05.2023 9.85 Nasdaq C. 3611.28 0.0% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6571.93 0.9% 1.70 1.79 1m 1.75 1.60 Eurostoxx50 2681.88 0.6% 1.70 1.82 3m 1.82 1.70 DAX 8254.72 0.7% 1.71 1.85 6m 1.87 1.77 Nikkei 225 14583.43 -1.5% 1.76 1.92 12m 2.00 1.93 OSEBX 491.75 -0.7% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets