Morning Report

19.03.2013

Tax battle on Cyprus

The Cypriot rescue deal was main focus in markets yesterday. Cypriot authorities are trying to renegotiate the deal with EU and IMF. They try to reshuffles the prosed levy so that those with large deposits will carry a larger share of the tax burden compared to the original proposal. The Cypriot Parliament is supposed to vote over the bail out tonight. According to Reuters, they will not approve the bank deposit levy.

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The proposed rescue deal for Cyprus, where a levy would be imposed on all bank deposits, faces massive opposition among the Cypriot people. In the original proposal deposits over 100 000 euro will have a tax of 6.7 per cent, and larger deposits a tax rate of 9.9 per cent. Ministers have over the past 24 hours tried to negotiate a revised plan to ensure that the deal will gain majority in the Parliament. They Norsk 10y sov. try to reshuffles the prosed levy so that those with large deposits will carry a larger share of the tax 2.8 150 burden compared to the original proposal. No final deal has been presented and there are many rumors 2.6 100 going around. EU officials are according to Financial Times pushing the Cypriot government to exempt 2.4 2.2 50 all deposits holders below 100 000 euro. Instead they want a levy on 15.6 per cent on all deposits 2.0 above that level. However, according to Wall Street Journal the parties have agreed that deposits below 1.8 0 100 000 euro will have a levy of 3 per cent, while the tax on larger deposits will be higher. EU officials 19-Feb 05-Mar 19-Mar say Cyprus may change the structure of the solidarity levy as long as the revenue of 5.8 billion euros rente Diff(bp,rha) remains. The Cypriot Parliament will vote on the bank deposit levy this evening. If it is not approved, Cyprus will not receive a EUR 10 billion rescue loan. The Government says they then will go bankrupt. Still, Cypruss parliament is set to reject a divisive tax on bank deposits, according to Reuters.
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Cypriot bank have large deposits from foreign investors, among other countries from Russia due to the favorable Cypriot tax rules. The rating agency Moody estimates that Russian companies, banks and households had deposits totaling USD 31 billion in Cypriot banks at year end. Thus, Russian interests have to carry a large share of the tax burden. Russian authorities, thus, do not approve of the deal. As a result, the Russian finance minister now say Russia will reconsider easing the terms of a EUR 2.5 billion loan that has kept the Cyprus afloat over the last two years. The proposal on a levy on deposits is very controversial. EU officials has emphasized that it is a one off. Financial markets still fear that similar measures may be adapted in other troubled countries, like Italy and Spain. Thus, risk aversion has increased since the deal was known. But, there are no signs of panic and the market reactions have been relatively muted. Stock markets declined yesterday, but the Asian markets have started up this morning. The Euro immediately weakened when the rescue deal was announced, but has since recouped most of its losses and EURUSD is currently trading around 1.295, only trading about 0.5 per cent lower than Friday morning. The Norwegian krone has been relatively stable and EURNOK is currently trading around 7.50. The most important key figure yesterday was the NAHB index which measure US homebuilder sentiment. The index fell from 46 in February to 44 in March. Consensus expected an outcome of 47. This is the second month in a row that the index declines and the level is currently the lowest in five months. On the positive side, expectations for the next six months rose slightly. In total it seems like sentiment is somewhat more muted that at New Years. Still, the index is at levels indicating that house building will pick up going forward. And today house building statistics for February is released. In December house starts was at its highest levels since 2008. It fell back somewhat in January, but is at far higher levels than a year ago. In February consensus expect that house starts picked up again, to 915 units. The German ZEW sentiment index is also released today. The index is, according to Reuters, expected to be at 48.0, about the same levels as last month. camilla.viland@dnb.no

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

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

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) 10:00 14:00 EZ USA Trade balance NAHB housing index

As of Jan Mar As of Feb Mar Feb

Unit Bln Index Unit y/y % Index mill

Prior 11.7 46 Prior 2.7 48.2 0.890

Poll -3.5 47 Poll 48.0 0.915

Actual -3.9 44 DNB

Todays key economic events (GMT) 09:30 UK CPI 10:00 Germany ZEW index 12:30 US Housing starts

Morning Report
19.03.2013

3m LIBOR
0.15 0.14 0.13 0.12 0.11 19-Feb
EUR

05-Mar

0.30 0.29 0.29 0.28 0.28 0.27 19-Mar

NOK & 3m NIBOR 7.60 1.95 1.90 7.50 1.85 7.40 1.80 7.30 1.75 7.20 1.70 19-Feb 05-Mar 19-Mar
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 94.51 1.2886 0.8537 7.4568 8.3270 1.2172 7.4980 5.8210 6.16 90.08 100.62 8.785 6.163

Today 95.51 1.2945 0.8569 7.4556 8.3426 1.2258 7.5066 5.7979 6.07 90.01 100.67 8.756 6.124

Spot rates and forecasts In 1m Jun-13 Sep-13 Mar-14 FX 0700 1.1 95 92 94 97 AUD 0.5 1.30 1.32 1.34 1.37 CAD 0.4 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.2 8.40 8.45 8.45 8.60 RUB 0.7 1.22 1.22 1.25 1.27 GBP 0.1 7.40 7.30 7.35 7.40 HKD -0.4 5.69 5.53 5.49 5.40 KWD -1.4 5.99 6.01 5.84 5.57 LTL -0.1 88.1 86.4 87.0 86.0 LVL 0.0 99.3 98.0 98.7 99.3 NZD -0.3 8.71 8.59 8.55 8.51 SEK -0.6 606.56 598.36 588.00 582.68 SGD

USD NOK 1.038 6.016 1.022 5.671 0.947 612.209 19.795 29.287 30.835 18.801 1.511 8.758 7.760 0.747 0.285 20.375 2.667 2.174 0.542 10.700 0.824 4.778 6.443 89.977 1.250 4.639

US dollar

6.0 5.8 5.6 5.4 5.2 19-Feb

1.35 1.30
05-Mar

1.25 19-Mar
EURUSD(rha)

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

Prior 1.77 1.82 1.88 2.10 2.06 2.42 2.78 3.17

Last 1.80 1.85 1.94 2.14 2.05 2.39 2.76 3.13

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

Prior 1.16 1.24 1.32 #N/A 1.52 1.81 2.08 2.35

Interest rates Last USD 1.16 1m 1.24 3m 1.32 6m #N/A 12m 1.52 3y 1.81 5y 2.08 7y 2.35 10y

Prior 0.20 0.28 0.44 0.73 0.51 0.97 1.48 2.07

Last 0.20 0.28 0.45 0.73 0.50 0.95 1.45 2.03

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

Prior 0.06 0.13 0.22 0.43 0.56 0.90 1.27 1.72

Last 0.06 0.13 0.22 0.43 0.54 0.88 1.24 1.69

USDNOK

Japanese yen

100.0 95.0
90.0

7.0 6.0
05-Mar

Norw ay Prior NST475 97.90 10y yld 2.23 - US spread 0.33 3m nibor 1.85 1.85 1.85

85.0 19-Feb
USDJ PY

5.0 19-Mar
JPYNOK(rha)

Norw ay Jun-13 Sep-13 Mar-14

Governm ent bonds Last SEK Prior Last US Prior 98.10 10y 113.48 113.51 10y 100.88 2.21 10y yld 1.89 1.89 10y yld 1.90 0.26 - US spread -0.01 -0.06 30y yld 3.11 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jun-13 Sep-13 Mar-14 1.20 1.20 1.20 2.25 2.25 2.50 Jun-13 Sep-13 Mar-14 0.35 0.35 0.35

Last Germany Prior Last 100.45 10y 100.42 100.99 1.95 10y yld 1.45 1.39 3.17 - US spread -0.45 -0.56 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 Jun-13 Sep-13 Mar-14

SEKNOK & CHFNOK 91 90 89 88 87 86 85 84 83 19-Feb 05-Mar

6.2 6.1 6.0 5.9 19-Mar

Equities 14700 14200 13700 13200 12700 12200 19-Feb 05-Mar

485 480 475 470 465 460 19-Mar

NOK sov. NST19 NST20 NST21 NST471 NST472 NST473 NST475 NST475 NOK FRA JUN SEP DEC MAR

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 2.37 1.54 -83 19.06.2013 0.25 Last 92.40 92.71 2.47 1.54 -93 18.09.2013 0.50 Oil price: (Ldn,cl) 1m 1.61 1.62 1 18.12.2013 0.75 SPOT 108.90 109.25 1.27 1.22 -4 15.05.2015 2.16 Gold price 18.03.2013 PM 1.45 1.44 -1 19.05.2017 4.17 AM: 1595.5 1603.8 1.70 1.70 -1 22.05.2019 6.18 Equities Today 0700 % last 2.24 2.21 -3 24.05.2023 10.19 Dow Jones 14452.06 -0.4% 2.23 2.21 -2 24.05.2023 10.19 Nasdaq C. 3237.59 -0.4% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6457.92 -0.5% 1.76 1.86 1m 1.82 1.80 Eurostoxx50 2705.47 -0.7% 1.73 1.85 3m 1.90 1.85 DAX 8010.70 -0.4% 1.74 1.86 6m 1.95 1.94 Nikkei 225 12468.23 2.0% 1.77 1.90 12m 2.13 2.14 OSEBX 479.10 -0.3% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
19.03.2013
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