Morning Report

15.06.2012

All eyes on Greece

The market is awaiting this weekend's elections in Greece. The G20 countries said that central banks are ready to step in if the result of elections in Greece is chaos.
NOK & 3m NIBOR 7.70 7.60 7.50 7.40 7.30
3m ra.

2.50 2.40 2.30 2.20

EURNOK

The growth in investment in oil sector in Norway is still healthy. For 2012 investments are expected to reach 187 billion, almost 30% higher than the estimate for 2012 given last year. For next year it is estimated 194 billion, which is 36% higher than the estimate for this year given a year ago. Initial claims to unemployment benefits in the U.S. rose by 386' last week, while the previous week was marginally revised upwards. It was expected a rise last week of 375' people. The slowdown in the U.S. labor market seems to continue. Core inflation in the U.S. rose as expected by 0.2% from April to May. A sharp fall in energy prices contributed to a 0.3% fall in CPI during the same period. The trend in core inflation is now rising, and that annual growth is over the inflationtarget, making Fed's balancing act even more difficult. The Swiss central bank kept interest rates unchanged at yesterday's monetary policy meeting, and will still keep liquidity exceptionally high. The floor of the EURCHF is maintained, while one is willing to buy an unlimited amount of euros to defend the floor. SNB sees still downside risk for inflation and growth if the Swiss franc appreciates. Nor BoJ did any changes to its monetary policy meeting, but commented that growth now seems to be picking up. Italy sold 4.5 billion euros yesterday, 3 billion in a 3-year government bond, the remainder in the 7 and 8-year loans. The interest rate on the 3-year bond was 5.3 percent, up from 3.86% which is the average so far this year for loans with the same maturity. Nevertheless, the auction was considered successful since the demand was good and the interest rate in the auction was somewhat lower than it was in the secondary market at the time of the auction. And this was despite the fact that the interest rate on the Spanish 10-year government bonds rose to over 7% yesterday, once again record high levels. A spokesman for the G20 said yesterday that the major central banks are ready to act, with coordinated action, if Sunday's elections in Greece would increase volatility in the market significantly. The statements were positively welcomed in the market and contributed to a strengthening of the euro against the dollar since yesterday. BoE's King said they will offer banks 3-4 year loan with interest below market rates, and that the likelihood of more QE has increased recently. The Norwegian krone remains strong and is virtually unchanged against the euro but strengthened against the dollar yesterday. Both the U.S. and Asian stock markets were lifted by the statements from the G20, and outweighed weak figures from the U.S. The independent rating agency Egan Jones cut France's rating from A-to BBB + and Moody's downgraded several Dutch banks have not given market movements. Today we get mostly U.S. data. Empire Manufacturing is expected to fall from 17.1 to 13.0, following a sharp rise in the previous month. The growth in production is expected to be slightly lower than the surprisingly good figures from April. The underlying trend shows evidence of a slightly lower growth rate in production. However, capacity utilization has picked up recently, but is expected to remain unchanged from April to May. From Sweden we get figures for unemployment from the Labour department which is expected to show a rise in unemployment. But everybody awaits the election in Greece on Sunday. The latest polls, from the beginning of the month has shown New Democracy and Syriza are neck to neck. Electoral system in Greece means that the majority party is awarded 50 extra seats in parliament (out of 300). Thus, New Democracy is able to form a majority government in coalition with PASOK if they get together more than 40% of the votes. However, if Syriza is to come in government, this may not mean as much as previously expected. Tsipras, the party's leader says he will keep the euro. But that the demands for austerity measures from the troika curbs growth too much. And it seems there is a growing understanding among European politicians that a renegotiation of the Greek terms may be right. Especially after Spain received its banking package with what appears to be favorable terms. But that market fluctuations will be large, whatever the outcome, is certain. magne.ostnor@dnb.no

7-May 25-May 14-Jun

SEK & 3m STIBOR 9.3 9.1 8.9 8.7

3m ra.

2.20

2.00
EURSEK

7-May 25-May 14-Jun

Headquarters 0021 Oslo Stranden 21

+47 03000

Offices Abroad New York London Shanghai Singapore Stockholm

+ 1 212 681 2550 +44 207 283 0050 +86 21 6132 2888 +65 6220 6144 +46 84 73 48 50

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 Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

56 13 27 20 75 52 99 10 69 39 41 50 62 54 14 82 61 24 79 56 38 14 61 64 22 01 76 50 51 84 04 30 77 62 96 80 73 87 49 73 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 Magne stnor 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 57 22 01 76 67

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

Yesterday's key economic events (GMT) 0/:30 Switzerland Interest rate meeting 12:30 USA CPI, ex food and energy 12:30 USA Initial claims Todays key economic events (GMT) 12:30 USA Empire Manufacturing 13:00 USA Net flows (TICS) 13:15 USA Industrial output

As of Jun May Week 23 As of Jun Apr May

Unit % m/m % 1000 Unit index bln m/m %

Prior 0-0.25 0.2 377 Prior 17.1 36.2 1.1

Poll 0-0.25 0.2 375 Poll 13.0 0.1

Actual 0-0.25 0.2 386 DNB

Morning Report
15.06.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 125 115 105 95 7-May
NOK TWI ra.

96 94 92 90 25-May 14-Jun
$/b

EUR vs GBP & CHF 1.20 1.20 1.20 1.20

GBP r.a

0.82 0.81 0.80 0.79

CHF

7-May 25-May 14-Jun

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

Prior 79.39 1.263 0.812 1.201 7.508 8.855 7.432 5.945 7.491 0.849 9.243 7.011 8.834 1.181 10.908

Last 78.88 1.264 0.813 1.201 7.508 8.856 7.432 5.943 7.538 0.849 9.239 7.012 8.891 1.180 10.900

% -0.6% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0% 0.0% 0.6% -0.1% 0.0% 0.0% 0.6% -0.1% -0.1%

In 1 m ...3 m 80 84 1.23 1.30 0.79 0.83 1.20 1.20 7.60 7.50 9.10 9.00 7.45 7.45 6.18 5.77 7.72 6.87 0.84 0.83 9.6 9.0 7.40 6.92 5.92 5.82 1.20 1.20 11.52 10.84

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.20 1.30 7.50 7.60 9.00 9.00 7.45 7.45 5.56 5.43 6.54 6.39 0.83 0.84 8.8 8.7 6.67 6.43 5.67 5.46 1.20 1.18 10.59 10.34

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

USD 1.0020 1.0238 0.9508 20.19 5.8837 1.5547 7.7588 126.95 0.2800 2.7330 0.5524 0.7834 3.3887 1.2760 32.4240

% -0.02% 0.06% -0.02% -0.13% 0.00% -0.06% -0.01% -0.03% -0.05% -0.05% 0.11% 0.09% -0.17% -0.15% -0.25%

EURSEK & OMXS 9.3 9.1 8.9 8.7

OMXS ra. EURSEK

550 500 450 400 350

7-May 25-May 14-Jun

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

NIBOR Prior 2.02 2.35 2.71 2.90 2.84 3.04 3.23 3.41

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.08 1.89 1.90 0.33 2.38 2.14 2.14 0.58 2.72 2.40 2.40 0.89 2.90 2.53 2.53 1.05 2.83 1.98 1.96 1.06 3.04 2.15 2.14 1.40 3.22 2.31 2.30 1.69 3.40 2.47 2.45 1.99

Last 0.33 0.58 0.89 1.05 1.06 1.40 1.69 1.99

USD LIBOR Prior Last 0.24 0.24 0.47 0.47 0.74 0.74 0.91 0.91 0.69 0.69 1.03 1.01 1.39 1.37 1.78 1.78

Gov. Bonds, 10y 2.00 1.75 1.50 1.25 1.00

NOK, ra.

3.00 2.50 2.00 1.50

SEK

7-May 25-May 14-Jun

10y 10y yield vs bund

NORWAY Prior Last 117.6 98.75 2.16 2.13 0.67 0.62

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 117.93 118.01 102.396 102.20 100.98438 1.54 1.53 1.49 1.51 1.64 0.05 0.02 0.15

Last 101.17 1.63 0.12

13.5 13.0 12.5

JPY and DowJones

81 79 77

75 12.0 7-May 25-May 14-Jun

USDJPY ra. DowJones, 1000

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.50 3.50 2.10 2.75 0.65 2.50 2.45 3.75 2.05 2.75 0.65 2.75 2.75 4.25 2.15 3.00 0.65 3.25
% - 0.00 0.03 - 0.07 - 0.15 Last 97.2 97.0 1613.5

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

% 1.2% 0.6% -0.3% 0.2% -0.2% 0.0% 0.2% -0.5% -0.6%

USD and gold 1670 1620 1570 1.35 1.30 1.25

1.20 1520 7-May 25-May 14-Jun

EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today JUN 2.38 2.38 0.00 NOK 93.85 SEP 2.37 2.38 -0.01 SEK 117.64 DEC 2.37 2.38 -0.01 EUR 100.47 MAR 2.38 2.39 -0.01 USD 81.76 FRA SEK 3m Prior chg GBP 82.70 JUN 2.15 2.15 0.00 Comm. Today SEP 1.94 1.94 0.00 Brent spot 97.2 DEC 1.81 1.80 0.00 Brent 1m 97.9 MAR 1.77 1.76 0.01 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

Stock ex. Today Dow Jones 12,651.9 Nasdaq 2,836.3 FTSE100 5,467.1 Eurostoxx50 2,148.2 Dax 6,138.6 Nikkei225 8,568.9 Oslo 382.09 Stockholm 458.99 560.76 Copenhagen

Morning Report
15.06.2012
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 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 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. 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. Recipients of the Note should note that, by virtue of their status as accredited investors or expert investors, the Singapore branch of DNB Bank ASA will be exempt from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the FAA), the Financial Advisers Regulations and associated regulations there under. In particular, it will be exempt from: - Section 27 of the FAA (which requires that there must be a reasonable basis for recommendations when making recommendations on investments). 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. 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: This note (the Note) is a market letter, as the term is defined in NASD Rule 2211, and, thus, does not constitute a research report within the meaning of U.S. securities laws and regulations, including, without limitation, SEC Rule 15a-6, NASD Rule 2711 and Regulation AC.