Morning Report

14.11.2012

Greek debt sale wins time for the troika

2.00 1.90 1.80 24Oct 13Nov

Inflation is still low in Sweden, but on the rise in the UK. Successful Greek debt auctions of government bills and rumors that Greece will receive three tranches of the aid payments in one go, contributed to improve the sentiment in Europe. In Sweden, core inflation (CPIF) came in at 1.1% y/y in October, as expected by the central bank, up from 0.9% the month before. It was marginally lower than consensus expectations (1.2%), and marginally higher than our estimate (1.0%). The market reaction was small, and the market still prices in a cut in the key interest rate of 25 bp at the next meeting in December. The interest rate path of the central bank from the previous meeting in October indicates a slight chance of a cut during the winter. We still believe the central bank cuts in December. In the UK, inflation rose from 2.2% y/y in September to 2.7% in October (consensus 2.3%), after falling steadily over the past year. The increase is to some extent explained by higher food prices and an increase in tuition fees at universities. Inflation is expected to remain above the target of 2% well into the next year. Despite several disappointing figures from Germany lately, consensus expected an improvement in the ZEW index (sentiment index among analysts and investors) from October to November. However, the index fell from -11.5 in October to -15.7 in November. It seems the boost to investor sentiment after the ECB announced OMT is abating. That said, the fall brings the ZEW index more in line with other sentiment indexes, as well as industrial production and -orders. Yesterdays data did not contribute to any large market movements. But Greece issued in excess of 4 billion euros of government bills in the market yesterday, which had a soothing effect on the market and gave troika more time to agree. The German newspaper Bild reported that Germany had agreed that Greece would be paid three of the tranches in the aid package simultaneously, or about 44 billion euros. The euro shook off the weak ZEW figures and strengthened broadly yesterday, despite the Bild-rumors being rejected by a German Finance Ministry spokesman. European stock markets rose on these rumors. In the United States, uncertainty about Greece and the consequences of "Fiscal cliff" weighed on the bourses and the major stock exchanges ended down about half a percent. Both the Norwegian and the Swedish krona weakened against the euro yesterday, and the turnover in Norwegian kroner was low. Bank of England publishes its quarterly inflation report today. The report will most likely draw a picture of an economy with significant challenges, and the current high inflation figures were probably the last thing they wanted. Several MPC members have recently expressed their skepticism about the necessity and effectiveness of further QE, and the amount of asset purchases were therefore kept unchanged at last weeks MPC-meeting. But the government has decided that the coupon payments on the government debt that the BoE purchases as part of the quantitative easing will be repaid the Treasury. It will help to reduce the need to issue government debt and will therefore have an expansionary effect on the economy. Thus, the amount of asset purchases in practice increased by 35 billion pounds (cumulative coupon at the end of March 2013) from 375 billion. This amount will be transferred the Treasury over the next two years. Beyond this, coupons amount to 3 billion pounds every quarter. Last week's easing of monetary policy was not done by the central bank, but by the Treasury. From the euro zone we have the figures for industrial production in September today. Production has increased in three of the last four months. But the production of the four largest economies has disappointed in September, which is why consensus expects a sharp fall for the euro zone overall (consensus -1.2% m / m). It would mean that production only grew marginally in Q3 as a whole. Retail sales in the U.S. were strong in Q3, but uncertainty about the impact of "fiscal cliff" and moderate income growth indicates slowing growth ahead. Retail sales excluding automobile purchases are expected to rise 0.6% m / m, after an increase of about 1% in the previous three months. There were small changes in the communication from the Fed after the monetary policy meeting 23-24 October. Tonight the minutes are released, and the most interesting thing would be to see if there were discussed any explicit target for unemployment. magne.ostnor@dnb.no As of Yesterdays key economic events (GMT) 08:30 Sweden CPI Oct 09:30 UK CPI Oct 10:00 Germany ZEW-index Oct As of Todays key economic events (GMT) 10:00 EMU Industrial production Sep 13:30 USA Retail sales ex autos Oct USA Minutes from FOMC 23.-24. Oct Unit y/y % y/y % Index Unit y/y % m/m % Prior 0.4 2.2 -11.5 Prior -2.9 1.1 Poll 0.5 2.3 -10.0 Poll -2.3 0.2 Actual 0.4 2.7 -15.7 DNB

SEK & 3m STIBOR 8.7 8.6 8.5 8.4 04Oct

1.60 1.50 1.40 1.30 24Oct 13Nov

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Sales Oslo (+47) Equity Fixed Income

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Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

56 13 27 20 75 52 9910 69 39 41 50 62 54 14 82 52 72 09 06 61 24 79 56 38 07 28 62 22 01 76 50 51 84 04 30 77 62 96 80 73 58 74 89 33 01 73 80 70 11 69 85

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Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal

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Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen

22 01 78 37 22 01 77 62 22 01 76 77 22 01 77 36 22 01 78 15

Morning Report
14.11.2012
SPOT RATES AND FORECASTS
FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK Prior 79.41 1.271 0.801 1.205 7.336 8.628 7.458 5.748 7.272 0.850 9.164 6.790 8.554 1.178 10.781 Last 79.59 1.272 0.800 1.204 7.330 8.627 7.457 5.764 7.246 0.850 9.157 6.787 8.530 1.179 10.783 % 0.2% 0.1% 0.0% -0.1% -0.1% 0.0% 0.0% 0.3% -0.3% 0.0% -0.1% 0.0% -0.3% 0.1% 0.0% In 1 m ...3 m 78 76 1.27 1.20 0.80 0.78 1.20 1.20 7.30 7.25 8.55 8.55 7.45 7.45 5.75 6.04 7.37 7.95 0.85 0.86 9.1 9.3 6.73 7.13 5.25 5.42 1.17 1.17 10.69 10.84 ...6 m ...12 m 76 78 1.20 1.25 0.78 0.80 1.20 1.20 7.25 7.40 8.50 8.60 7.45 7.45 6.04 5.92 7.95 7.59 0.86 0.87 9.3 9.3 7.08 6.88 5.38 5.37 1.16 1.15 10.82 10.63 FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB USD 1.0454 1.0012 0.9468 20.07 5.8661 1.5891 7.7510 129.17 0.2823 2.7163 0.5478 0.8173 3.2921 1.2223 31.7271 % 0.14% -0.12% -0.14% -0.01% -0.09% 0.11% 0.01% -0.18% -0.37% -0.10% -0.13% 0.10% -0.13% -0.08% -0.09%

Oil spot & NOK TWI 1.00 0.50 0.00 04-Oct 24-Oct 13Nov
$/b

94 92 90

NOK TWI ra.

EUR vs GBP & CHF 1.22 1.21 1.21 1.20 04Oct

0.82 0.81 0.80 0.79 0.78 24Oct 13Nov

EURSEK & OMXS 8.7 8.6 8.5 8.4 04Oct

520 500 480 24Oct 13Nov

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

NIBOR Prior 1.83 1.91 2.10 2.24 2.24 2.53 2.82 3.16

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.81 1.39 1.39 0.06 1.92 1.46 1.45 0.13 2.11 1.56 1.55 0.26 2.23 1.65 1.64 0.38 2.25 1.29 1.29 0.48 2.54 1.49 1.49 0.83 2.82 1.74 1.74 1.23 3.15 2.00 2.00 1.65

Last 0.06 0.13 0.26 0.38 0.51 0.85 1.23 1.67

USD LIBOR Prior 0.21 0.31 0.53 0.70 0.47 0.76 1.16 1.63

Last 0.21 0.31 0.52 0.70 0.46 0.78 1.17 1.65

Gov. Bonds, 10y 1.80 1.60 1.40 1.20 04Oct 24Oct 13Nov
SEK NOK, ra.

2.20 2.10 2.00 1.90 1.80

10y 10y yield vs bund

NORWAY Prior Last NO9YT=RR 99.55 2.04 0.70 2.05 0.72

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 118.49 118.60 101.398 101.62 1.41 0.07 1.40 0.08 1.34 1.32

US Prior 100.2813 1.59 0.25

Last 100.17 1.61 0.29

JPY and Dow Jones 14.0 82 13.5 80 13.0 78 12.5 12.0 76 042413Oct Oct Nov
USDJPY ra. DowJones, 1000

USD and gold 1800 1700 1600 04Oct 24Oct 13Nov

1.35 1.30 1.25 1.20

EURUSD ra.

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY US 3m nibor 10y sw ap 3m stibor 10y sw ap 3m euribor 10y sw ap 3m libor 10y In 3m 1.90 3.25 1.30 2.25 0.35 1.75 0.45 6m 1.90 3.25 1.30 2.25 0.25 1.75 0.45 12m 2.15 3.50 1.30 2.50 0.25 2.00 0.45 MISCELLANEOUS FRA NOK 3m Prior chg TWI Today % Stock ex. Today DEC 1.90 1.90 0.00 NOK 91.67 Dow Jones 12 756.2 MAR 1.87 1.87 0.00 SEK 114.79 0.10 Nasdaq 2 883.9 JUN 1.86 1.85 0.01 EUR 100.31 0.04 S&P 500 1 374.5 SEP 1.87 1.87 0.00 USD 81.05 - 0.05 Eurostoxx50 2 493.1 FRA SEK 3m Prior chg GBP 83.80 Dax 7 169.1 DEC 1.38 1.38 0.00 Comm. Today Last Nikkei225 8 664.7 MAR 1.19 1.20 -0.01 Brent spot 109.9 alid field( Oslo 432.32 JUN 1.11 1.11 0.01 Brent 1m 108.2 108.3 Stockholm 498.86 SEP 1.11 1.10 0.01 Spot gold 0.0 1726.3 Copenhagen 634.49 Sources to all tables and graphics: Reuters and DNB Markets

sw ap 1.75 1.75 2.25

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