Morning Report

26.03.2012

Government bond yields slides further

NOK & 3m NIBOR 7.70 7.60 7.50 7.40 7.30
3m ra.

2.80 2.60 2.40 2.20

EURNOK

Euro zone finance ministers meet again this week, and Chinese PMIs are released next Sunday. Todays important German IFO release is expected to rise. International stock markets rose slightly during Fridays session and the Nikkei index has risen further on Monday. Still we see evidence of risk-off movements in other markets. 10-year government bond yields have slid further, particularly German yields (about 10 basis points). In FX markets the Japanese yen has strengthened against the dollar since Friday morning. Despite a higher oil price the Norwegian krone has weakened on a broad basis, which is also the case for the Swedish krona. Friday's US new home sales release was disappointing. Sales fell unexpectedly by 1.6 per cent m/m in February, from 318' (downwardly revised from 325) to 313'. The level is very low, but 11.4 per cent higher than in February last year. The trough has been reached, although the improvement is very slow. Pending home sales, normally a good leading indicator of actual sales, is released today. It is expected to have increased slightly in February. The sovereign debt crisis will be an important market theme this week. Italy, which experienced another rise in borrowing costs in secondary markets last week, plans to auction 7.5 billion euros of debt this week. On 30 - 31 March European finance ministers meet again, this time in Copenhagen. The size of the firewalls surrounding systemically important, heavily indebted countries (i.e. Italy, Spain) in the form of increased allocation to crisis funds will be the main topic. According to the German newspaper Spiegel Germany is now giving in to long-term pressure from both its fellow euro members and the IMF. The latter organization's director, Christine Lagarde, said that the IMF's contribution will not be increased before the euro members themselves step up their own efforts. One of the proposals which will be assessed is to maintain the EFSF facility (which has a lending capacity of 440 billion) until 30 June 2013, in parallel with the establishment of ESM (capacity of 500 billion) in July. This would provide a total lending capacity of 940 billion euros, of which 200 billion is already tied up in existing loan obligations. This would be a temporary solution that would not require that Merkel must seek the approval of the German parliament. The European Commission has made it clear that they prefer the remaining lending capacity of EFSF (240 bn) to be converted to ESM capital, providing a permanent increase in the total lending capacity. Todays potentially market moving figure is the German IFO index. It is a good indicator of German industrial production, and expected to have risen slightly in March. If so, this will be the fifth consecutive month of increase. Thursday we get sentiment indices from both the household and business sector in the euro zone, and on Friday the flash estimate of consumer price inflation in March is released. Key US indicators to be released this week are the Conference Boards consumer confidence index (Tuesday), manufacturing orders (Wednesday) and Chicago PMI (Friday). Friday we also learn how the consumption and income of US households developed in February. This weeks most important release are the two Chinese manufacturing PMIs (the official index and HSBCs index) for March, due on Sunday. We have already gotten a disappointing flash estimate of the latter, which fell to 48.1. Several Norwegian key figures will also be released this week: Unemployment on Thursday, CCI, PMI and retail sales on Friday. Norges Banks planned FX purchases in April will also be released on Friday. NIERs Swedish sentiment indicators are released on Wednesday. . kjersti.haugland@dnb.no

14-Feb 5-Mar 23-Mar

SEK & 3m STIBOR 9.0 8.9 8.8 8.7 14-Feb 5-Mar

3m ra.

2.60 2.40 2.20 2.00 23-Mar

EURSEK

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

+1 212 681 3800 +44 207 6211111 +86 21 6132 2888 +65 6220 6144 +46 8 4734850

Sales Oslo (+47) Equity Fixed Income FX/IR

22 94 89 40 22 01 78 20 22 01 76 50

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

Research Regional Sales (+47) Eirik Larsen 22 01 76 55

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

22 01 76 56 22 01 78 03 22 01 78 24 22 01 76 63 22 01 77 41 22 01 76 67

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

22 01 78 37 22 01 77 62 22 01 76 93 22 01 76 77 22 01 77 36 22 01 78 15

As of Fridays key economic events (GMT) 07:45 France INSEE business confidence Mar 14:00 USA New home sales Feb As of Todays key economic events (GMT) 07:00 Germany IFO, total Mar 12:00 USA Bernanke on the labour market 12:00 USA Pending home sales Feb 12:30 USA Chicago Fed activity Feb

Unit Index mill Unit index m/m % index

Prior 93.0 0.318 Prior 109.6 2.0 0.2

Poll 93.0 0.325 Poll 110.2 1.2

Actual 93.0 0.313 DNB

Morning Report
26.03.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 135 125 115 105 14-Feb 5-Mar
NOK TWI ra.

96 94 92 90 23-Mar
$/b

EUR vs GBP & CHF 1.22 1.21 1.21 1.20

GBP r.a

0.86 0.85 0.84 0.83 0.82

CHF

14-Feb 5-Mar 23-Mar

FX USDJPY EURUSD EURGBP EURCHF EURNOK EURSEK EURDKK USDNOK JPYNOK SEKNOK GBPNOK USDSEK JPYSEK NOKSEK GBPSEK

Prior 82.38 1.328 0.837 1.205 7.640 8.941 7.436 5.762 7.000 0.857 9.146 6.744 8.193 1.170 10.692

Last 82.67 1.326 0.836 1.206 7.629 8.930 7.436 5.756 6.964 0.855 9.131 6.740 8.152 1.172 10.691

% 0.4% -0.1% -0.1% 0.0% -0.1% -0.1% 0.0% -0.1% -0.5% -0.3% -0.2% -0.1% -0.5% 0.2% 0.0%

In 1 m ...3 m 83 84 1.30 1.30 0.83 0.83 1.23 1.23 7.60 7.60 8.90 9.20 7.45 7.45 5.85 5.85 7.04 6.96 0.85 0.83 9.2 9.2 6.85 7.08 5.68 5.94 1.17 1.21 10.72 11.08

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.23 1.30 7.60 7.60 9.00 9.00 7.45 7.45 5.63 5.43 6.62 6.39 0.84 0.84 8.9 8.7 6.67 6.43 5.67 5.46 1.18 1.18 10.59 10.34

FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB

USD 1.0449 0.9983 0.9095 18.58 5.6093 1.5865 7.7689 126.54 0.2785 2.6055 0.5260 0.8164 3.1348 1.2627 29.2230

% -0.20% 0.00% 0.14% 0.10% 0.12% -0.03% 0.01% 0.07% 0.05% 0.12% 0.08% -0.40% 0.14% 0.10% -0.26%

EURSEK & OMXS 9.0 8.9 8.8 8.7 14-Feb 5-Mar

OMXS ra. EURSEK

550 500 450 400 350 23-Mar

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

NIBOR Prior 1.92 2.28 2.61 2.79 2.84 3.15 3.41 3.64

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.92 1.99 1.99 0.37 2.28 2.28 2.26 0.72 2.61 2.48 2.48 1.07 2.79 2.59 2.58 1.26 2.84 2.04 2.04 1.23 3.14 2.23 2.23 1.60 3.40 2.43 2.44 1.96 3.64 2.61 2.62 2.32

Last 0.36 0.71 1.05 1.25 1.23 1.63 1.99 2.35

USD LIBOR Prior Last 0.24 0.24 0.47 0.47 0.74 0.74 0.89 0.89 0.80 0.83 1.33 1.36 1.82 1.86 2.31 2.34

Gov. Bonds, 10y 2.25 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

14-Feb 5-Mar 23-Mar

10y 10y yield vs bund

NORWAY Prior Last 114.25 110.15 2.50 2.49 0.63 0.61

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 113.958 113.93 101.13 101.00 1.98 1.98 1.87 1.89 0.10 0.09

US Prior 97.9375 2.23 0.36

Last 97.69 2.28 0.39

13.5 13.0 12.5

JPY and DowJones

85 80

12.0 14-Feb

5-Mar

75 23-Mar

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.30 3.50 2.15 2.75 0.80 2.50 2.45 3.75 2.10 2.75 0.80 2.75 2.60 4.25 2.00 3.00 0.80 3.25

US 3m libor 10y swap 0.50 2.50 0.50 2.50 0.50 3.00

% 0.3% 0.2% 0.2% -0.2% 0.2% 0.0% 1.1% 0.9% -0.3%

USDJPY ra. DowJones, 1000

USD and gold 1.42 1900 1.38 1800 1.34 1700 1.30 1600 1.26 1500 14-Feb 5-Mar 23-Mar
EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today JUN 2.24 2.24 0.00 NOK 95.42 SEP 2.24 2.24 0.00 SEK 118.31 0.00 EUR 104.84 DEC 2.28 2.28 MAR 2.36 2.35 0.01 USD 79.41 FRA SEK 3m Prior chg GBP 81.40 JUN 2.00 1.99 0.01 Comm. Today 0.00 Brent spot 126.1 SEP 1.83 1.82 DEC 1.79 1.79 0.00 Brent 1m 124.9 MAR 1.81 1.80 0.00 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

% Stock ex. Today - 0.15 Dow Jones 13,080.7 - 0.08 Nasdaq 3,067.9 - 0.01 FTSE100 5,854.9 0.12 Eurostoxx50 2,525.4 - 0.1 Dax 6,995.6 Last Nikkei225 10,018.2 126.1 Oslo 428.36 125.1 Stockholm 498.59 584.59 1664.0 Copenhagen

Morning Report
26.03.2012
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