Morning Report

21.03.2013

OBR revises down growth forecasts

NOK & 3m NIBOR
7.60 7.50 7.40 7.30 7.20 21-Feb 1.95 1.90 1.85 1.80 1.75 1.70 21-Mar
3m(rha)

Fed continues with QE, BoE votes as earlier, but the government in the UK revises down growth forecasts. Fed maintains their quantitative easing as expected. But revised down this years growth forecast marginally, from 2.7 percent to 2.6 percent. Not so surprising, after politicians have failed to agree, and the automatic budget cuts have taken effect. Bernanke said at the press conference that he had not yet seen any significant improvement in the labor market. Nevertheless, the estimate of unemployment at the end of this year was revised down from 7.6 percent to 7.4 percent. Thus, the majority of the members of the FOMC still expect the first rate hike in 2015. We are still expecting the end of 2014.

07-Mar

EURNOK

Norsk 10y sov.

2.8 2.6 2.4 2.2 2.0 1.8 21-Feb
rente

As expected, the OBR downgraded its UK growth forecasts by the submission of a revised budget for 2013. While they last December thought that growth this year would be 1.2 per cent, it was revised down to 0.6 percent now. It is very close to our estimate of 0.7 percent that we gave in January. 150 Although one still expects surplus budget in 2016/17, the deficits in the coming years are expected to be 100 somewhat larger. Therefore, the debt increases faster than expected, and is not expected to start to fall 50 until 2017/18.
0 21-Mar

07-Mar

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

At the last monetary policy meeting of the Bank of England, it was still the case that three of the nine members voted for an increase in quantitative easing , including Governor Mervyn King. The central bank has said that they are looking through the rise in inflation since this is due to an increase in administered prices and a weaker pound, and it was therefore expected that higher inflation should not be a barrier to an increase in securities purchases. The minutes pointed out that high inflation increases the risk of a rise in inflation expectations, with unfortunate consequences for the determination of wages and prices. And that further monetary policy easing may increase this risk, and lead to an undesirable weakening of the pound. Thus, it seems that the disagreement between the various fractions of the MPC is greater than previously thought, and that an increase in the quantitative easing is less likely. The situation in Cyprus still affects market sentiment. Nevertheless, market movements since the weekend must be charachterized as moderate, and by no means carries the distinction of having priced in spillover effects from Cyprus or "bank run" in other euro area countries. The belief that one will be able to find a solution led to an increase in European and U.S. stock markets and a stronger euro yesterday. The Fed confirming that it will continue its quantitative easing helped in the same direction. An increase in HSBCs PMI for China in the early hours today, further contributed to the rise in Asian stock markets. Interest rate curves steepened yesterday, with a small decline in short term interest rates and a rise in long. Italian and Spanish government bond yields fell. Today, the new members of the Board of the Bank of Japan are inaugurated. Expectations of monetary policy stimuli are large. Today they hold new members a press conference where it is expected that there will be an indication of the way forward. It helped Japanese interest rates to fall and the Japanese yen to depreciate. The yield on 10-year Japanese government bonds were traded at its lowest level in nearly ten years. British Pound strengthened after the minutes of the monetary policy meeting, but reversed later when the government presented its revised budget. The weakening of the Norwegian and Swedish kroner of about half a percent yesterday seems largely driven by a stronger euro. That said, the Norwegian krone weakened to the weakest level against the euro since the summer of last year. Flash estimates of overall PMI for the euro zone is expected to edge up from 47.9 in February to 48.2 in March. In this case, PMI for the first quarter points in the direction of a marginal fall in GDP in the first quarter. Germany has held sway over 50, and is expected to increase further. For France, Italy and Spain, the levels are still weak. Retail sales in the UK have fallen for four consecutive months, and are expected to do so in February. Still tight public budgets and weak consumer confidence points to continued weak consumption ahead. Unemployment in the UK remains high and dampens wage which in January was meager 1.2 percent, far below normal levels of 4 percent. With high inflation, it means a fall in the real income of households, which contributes to the low demand growth. House prices in the U.S. have risen eleven months in a row, and today we get numbers from FHFA for January. We expect further rise in house prices over the year. Sales of existing homes are expected to remain high, at the level of 2007. magne.ostnor@dnb.no Yesterdays key economic events (GMT) 09:30 19:00 UK Bank of England Minutes USA Fed interest rate decision UK Revised 2013 budget Todays key economic events (GMT) 08:58 EMU Flash-PMI 09:30 UK Retail sales 14:00 USA Existing home sales As of Unit % As of Mar Feb Feb Unit Index M/m % Mill Prior 0.25 Prior 47.9 -0.6 4.9 Poll 0.25 Poll 48.1 0.5 5.0 Actual 0.25 DNB

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 24 16 91 23

Morning Report
21.03.2013

3m LIBOR
0.15 0.14 0.13 0.12 0.11 21-Feb
EUR

07-Mar

0.29 0.29 0.28 0.28 0.27 21-Mar

USD(rha)

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 21-Feb 07-Mar 21-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 95.06 1.2872 0.8537 7.4535 8.3317 1.2201 7.5179 5.8410 6.15 90.32 100.90 8.813 6.164

Today 95.72 1.2936 0.8560 7.4536 8.3719 1.2228 7.5660 5.8518 6.11 90.48 101.55 8.842 6.190

Spot rates and forecasts In 1m Jun-13 Sep-13 Mar-14 FX 0700 0.7 95 92 95 100 AUD 0.5 1.30 1.32 1.34 1.37 CAD 0.3 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 0.5 8.40 8.40 8.45 8.60 RUB 0.2 1.22 1.22 1.25 1.27 GBP 0.6 7.45 7.40 7.40 7.40 HKD 0.2 5.73 5.61 5.52 5.40 KWD -0.6 6.03 6.09 5.81 5.40 LTL 0.2 88.7 88.1 87.6 86.0 LVL 0.6 100.0 99.3 99.3 99.3 NZD 0.3 8.76 8.71 8.60 8.51 SEK 0.4 610.66 606.56 592.00 582.68 SGD

USD NOK 1.037 6.064 1.026 5.701 0.945 618.577 19.904 29.374 30.924 18.906 1.511 8.837 7.762 0.753 0.285 20.533 2.669 2.190 0.542 10.779 0.826 4.827 6.471 90.354 1.251 4.673

US dollar

6.0 5.8 5.6 5.4 5.2 21-Feb

1.35 1.30
07-Mar

1.25 21-Mar
EURUSD(rha)

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

Prior 1.85 1.85 1.93 2.13 2.09 2.41 2.77 3.17

Last 1.89 1.88 1.95 2.14 2.10 2.44 2.78 3.16

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

Prior 1.17 1.25 1.32 #N/A 1.56 1.84 2.10 2.36

Interest rates Last USD 1.17 1m 1.25 3m 1.32 6m #N/A 12m 1.56 3y 1.84 5y 2.10 7y 2.37 10y

Prior 0.20 0.28 0.45 0.74 0.52 0.95 1.43 2.00

Last 0.20 0.28 0.45 0.74 0.51 0.94 1.43 2.03

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

Prior 0.06 0.13 0.23 0.43 0.60 0.88 1.23 1.66

Last 0.06 0.13 0.23 0.44 0.61 0.92 1.26 1.69

USDNOK

Japanese yen

100.0 95.0
90.0

7.0 6.0
07-Mar

Norw ay Prior NST475 98.16 10y yld 2.20 - US spread 0.30 3m nibor 1.85 1.85 1.85

85.0 21-Feb
USDJ PY

5.0 21-Mar
JPYNOK(rha)

Norw ay Jun-13 Sep-13 Mar-14

Governm ent bonds Last SEK Prior Last US Prior 97.74 10y 95.62 95.53 10y 100.86 2.25 10y yld 1.96 1.97 10y yld 1.90 0.30 - US spread 0.06 0.02 30y yld 3.13 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 100.39 10y 101.41 101.02 1.95 10y yld 1.35 1.39 3.19 - US spread -0.56 -0.56 10y sw ap 2.00 2.00 2.50 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 21-Feb 07-Mar

SEKNOK CHFNOK(rha)

6.3 6.2 6.1 6.0 5.9 21-Mar

Equities 14700 14200 13700 13200 12700 12200 21-Feb 07-Mar

Dow J.I.

485 480 475 470 465 460 21-Mar

Os lo(rha)

NOK sov. NST20 NST21 NST22 NST471 NST472 NST473 NST475 NST475 NOK FRA JUN SEP DEC MAR

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.51 1.65 14 18.09.2013 0.50 Last 93.09 92.75 1.53 1.51 -2 18.12.2013 0.75 Oil price: (Ldn,cl) 1m 1.62 1.64 1 19.03.2014 0.99 SPOT 107.97 108.55 1.23 1.28 5 15.05.2015 2.15 Gold price 20.03.2013 PM 1.43 1.49 6 19.05.2017 4.16 AM: 1610.8 1607.5 1.69 1.72 3 22.05.2019 6.17 Equities Today 0700 % last 2.21 2.26 5 24.05.2023 10.18 Dow Jones 14511.73 0.4% 2.20 2.25 5 24.05.2023 10.18 Nasdaq C. 3254.19 0.8% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6432.70 -0.1% 1.80 1.90 1m 1.85 1.89 Eurostoxx50 2708.90 1.4% 1.78 1.90 3m 1.92 1.88 DAX 8001.97 0.7% 1.80 1.91 6m 1.98 1.95 Nikkei 225 12635.69 1.3% 1.82 1.96 12m 2.18 2.14 OSEBX 475.88 -0.3% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
21.03.2013
IMPORTANT/DISCLAIMER
This note (the Note) must be seen as marketing material and not as an investment recommendation within the meaning of the Norwegian 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 TH E 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 assume 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), Monetary Authority of Singapore, the Chilean Superintendent of Banks, and on a limited basis by the Financial Services Authority of UK and the Swedish Financial Supervisory Authority. Information about DNB Markets can be found at dnb.no. 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 t he Financial Advisers Regulations (FAR). The Singapore branch of DNB Bank ASA is a financial advise r 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.