Morning Report

31.01.2012

Still uncertainty about Greece

NOK & 3m NIBOR 8.00 7.80 7.60 7.40
3m ra.

The Chinese government plans to open up its FX market. 25 of 27 EU countries are ready to ratify the new fiscal compact, while an agreement in Greece has not yet been reached.
3.20 2.90 2.60 2.30

21-Dec 10-Jan 30-J an

EURNOK

SEK & 3m STIBOR 9.1 9.0 8.9 8.8 8.7

3m ra.

2.80 2.70 2.60 2.50 2.40

EURSEK

21-Dec 10-J an 30-J an

Chinese authorities announced yesterday that they will establish a large onshore market for yuan trading. The market will take place in Shanghai, and will be organized the same way as the offshore market in Hong Kong, where investors have the opportunity to issue debt and invest in the CNH, the equivalent to the official exchange rate, CNY. According to The National Development and Reform Commission (NDRC), the onshore market in Shanghai will be established within three years. The measure is part of a process to make the yuan (CNY) freely convertible. According to the NDRC, the government wants more international investors to sell shares in yuan on the stock exchange in Shanghai. In addition the measure probably makes it easier for international companies to issue bonds in China. These bonds, known as "Panda bonds", have so far been very little used compared with similar bonds in Hong Kong ("Dim sum bonds"). The news does not seem to have influenced the Chinese stock exchanges thus far, which have fallen during the morning hours. Elsewhere in Asia, stock markets have edged up. Among others, the Nikkei index is up 0.1 percent, while the Hang Seng index is up 0.8 percent. Yuan has appreciated against the dollar since yesterday morning, probably as the government set a marginally higher fixing, and the dollar is now trading for 6.3155 against the yuan. We expect that the yuan will remain stable against the dollar as long as the uncertainty surrounding the debt crisis in the euro zone persists. It was clear yesterday that 25 of the 27 EU countries are ready to ratify the new fiscal compact, which implies stricter budget policies. The agreement means that member states (those that signs) must cut budget deficits to 0.5 percent of GDP. The two countries that have declined to sign the agreement are Czech Republic and Great Britain. The agreement will formally be signed by the remaining EU countries in March. It is not yet clear whether Greece is able to meet the requirements to receive a new loan tranche from the EU/IMF. Angela Merkel has in recent days have advocated that the EU should have a representative in Greece, in order to increase the likelihood that Greece is able to implement the required austerity measures. The proposal has been rejected by the Greek authorities, and yesterday the French president Nicolas Sarkozy said that such measure "would not be reasonable, will not be democratic nor would it be effective." Merkel, on the other hand, argues that Greece is a "special case" because of the involvement of private investors by the restructuring of the Greek debt. Credit demand in the U.S. increased in the fourth quarter of 2011, according to Fed's lending survey, published yesterday. The proportion of banks reported increased loan demand from small commercial and industrial companies (C&I) was at its highest since 2005. Domestic banks reported easier lending terms for C&I businesses of all sizes. The reason for this was increased competition from other banks and non-banks that issue credit. The survey, which was recorded in January this year, also is a witness that the U.S. market is affected by the turmoil in the euro zone. Foreign banks reported tighter lending practices. 80 percent of banks reported that the liquidity situation contributed to this, while all foreign banks reported that more uncertainty and worsening economic prospects led to tighter lending practices. As in the third quarter of 2011, the survey this time included extraordinary questions directed towards the ongoing crisis in the euro zone. A large proportion of banks reported to have tightened credit standards to European banks and other affiliates. There was more widespread tightening of credit to businesses that operate in the U.S. that are significantly exposed to the European economies than in the last lending survey. There were only minor movements in yesterday's markets. Yen has appreciated by 0.6 percent against the dollar while the euro has appreciated by 0.1 percent against the dollar. EURUSD is now traded at 1.3195. At the same time, the krone has increased by 0.1 and 0.3 percent versus dollar and euro, respectively. Stock exchanges around the world fell in value yesterday. Oslo Stock Exchange fell by about 1 percent, while the decline in U.S. stock markets was more moderate. ole.kjennerud@dnb.no Yesterday's key economic events (GMT) 13:30 USA Cons. deflator, core 13:30 USA Private consumption USA Fed's lendig survey Todays key economic events (GMT) 10:00 Norway Credit indicator, C2 10:00 Norway Retail sales 16:00 USA Consumer confidence, CB As of Dec Dec Q4 As of Dec Dec Jan Unit y/y % y/y % Unit y/y % m/m % Index Prior 1.7 0.1 Prior 6.6 0.1 64.5 Poll 0.1 Poll Actual 1.8 0.0 DNB 6.4 0.7 68.0

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Morning Report
31.01.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 118 112 106 100 98 96

100 94 21-Dec 10-Jan 30-J an

NOK TWI ra. $/b

EUR vs GBP & CHF 0.85 0.84 1.20 0.83 1.15 0.82 1.10 0.81 21-Dec 10-Jan 30-Jan 1.25
GBP r.a CHF

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

Prior 76.30 1.313 0.836 1.205 7.646 8.866 7.434 5.823 7.629 0.863 9.145 6.758 8.849 1.161 10.603

Last 76.31 1.318 0.838 1.206 7.656 8.874 7.434 5.812 7.618 0.864 9.147 6.737 8.831 1.161 10.596

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

In 1 m ...3 m 77 77 1.25 1.20 0.82 0.80 1.23 1.23 7.80 7.80 9.10 9.20 7.45 7.45 6.24 6.50 8.10 8.44 0.86 0.85 9.5 9.8 7.28 7.67 5.61 5.90 1.17 1.18 11.10 11.50

...6 m ...12 m 77 85 1.20 1.35 0.80 0.85 1.23 1.30 7.65 7.65 9.00 9.00 7.45 7.45 6.38 5.67 8.28 6.67 0.85 0.85 9.6 9.0 7.50 6.67 5.78 5.67 1.18 1.18 11.25 10.59

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

USD 1.0632 1.0002 0.9153 19.16 5.6436 1.5736 7.7568 123.14 0.2777 2.6202 0.5308 0.8232 3.2252 1.2556 30.3260

% 0.33% -0.23% -0.32% -0.42% -0.37% 0.20% 0.01% -0.23% -0.01% -0.38% -0.41% 0.45% -0.52% -0.21% -0.28%

EURSEK & OMXS 9.1 9.0 8.9 8.8 21-Dec 10-Jan 500 450 400 350 30-Jan

OMXS ra. EURSEK

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

N IBOR Prior 2.30 2.70 2.97 3.13 2.73 3.02 3.30 3.56

SWAP AN D MON EYM ARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.26 2.32 2.32 0.67 2.68 2.58 2.58 1.07 2.97 2.67 2.67 1.39 3.14 2.72 2.72 1.58 2.73 1.87 1.86 1.24 3.02 2.00 2.02 1.61 3.30 2.20 2.22 1.96 3.57 2.35 2.36 2.31

Last 0.66 1.07 1.38 1.57 1.24 1.60 1.96 2.30

USD LIBOR Prior 0.27 0.55 0.79 0.93 0.64 1.03 1.50 1.98

Last 0.27 0.55 0.78 0.93 0.65 1.06 1.51 1.98

Gov. Bonds, 10y 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

21-Dec 10-Jan 30-Jan

10y 10y yield vs bund

N ORWAY Prior Last 115.25 111.31 2.38 2.38 0.58 0.57

GOVERNM ENT BON DS SWEDEN GERMANY Prior Last Prior Last 116.833 116.81 101.886 101.68 1.72 1.71 1.80 1.81 -0.09 -0.10

US Prior 101.375 1.85 0.04

Last 101.25 1.87 0.06

13 12 11

JPY and DowJones

10 21-Dec

10-Jan

79 78 77 76 75 30-Jan

In 3m 6m 12m

INTEREST RATE FORECASTS N ORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.40 3.50 2.15 2.25 1.05 2.50 2.30 3.75 1.95 2.50 0.90 2.75 2.30 4.25 1.75 3.00 0.90 3.25

US 3m libor 10y 0.55 0.55 0.50

swap 2.25 2.50 3.00

USDJPY ra. DowJones, 1000

USD and gold 1900 1.42 1800 1.38 1700 1.34 1600 1.30 1500 1.26 21-Dec 10-Jan 30-Jan
EURUSD ra. Gold

FRA NOK MAR JUN SEP DEC FRA SEK MAR JUN SEP DEC

3m 2.58 2.33 2.28 2.27 3m 2.33 1.96 1.68 1.61

Prior 2.59 2.32 2.27 2.27 Prior 2.33 1.97 1.69 1.60

chg -0.01 0.01 0.01 0.00 chg 0.00 -0.01 -0.01 0.01

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 95.77 0.16 Dow Jones 12,653.7 -0.1% SEK 117.53 0.01 Nasdaq 2,811.9 -0.2% EUR 102.98 0.17 FTSE100 5,671.1 -1.1% USD 78.94 - 0.25 Eurostoxx50 2,404.6 -1.3% GBP 80.90 Dax 6,444.5 -1.0% Comm. Today Last Nikkei225 8,802.5 0.0% Brent spot 111.1 111.0 Oslo 394.67 -1.2% Brent 1m 111.4 110.8 Stockholm 472.61 -1.3% -0.9% Spot gold 1729.0 1729.0 Copenhagen 520.16 Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
31.01.2012
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