Morning Report

24.01.2012

Greek debt talk drag

Euro zone ministers last night rejected an offer made by private bondholders to help restructure Greece's debt. Even if the Greek debt talks drag, the fear of an escalation of the euro area debt crisis seems to be abating. This development has benefited the euro over the last few days. Euro zone ministers last night rejected an offer made by private bondholders to help restructure Greece's debt. Banks and other private investors demand an interest on four per cent on new longer dated bonds that are expected to be issued in exchange for their existing Greek holdings. Greece say they are not prepared to pay more than 3.5 per cent. An agreement between the parties is probably necessary to avoid a near term Greek default. Even if a Greek debt talks drag, the euro has strengthened since yesterday morning. EURUSD is currently trading around 1.30. In comparison the cross was around 1.26 one week ago. The EUR strengthening seems to be related to a general improvement in market sentiment. Stock markets have risen over the last week and Italian yields have declined. The interest on a 10 year Italian government bonds is now around 6 per cent, while they were about 7 per cent at the start of the year. Thus, it seems like the fear of an escalation of the debt crisis is abating. The latest ECB measures may explain this development. The central bank offer European banks 3 years funding at a very favorable interest rate (1 per cent). This can be a way to finance debt burdened euro area economies. The banks may borrow cheaply from the central bank and invest the money at a higher rate, in for example Italian government bonds. The measure is seemingly a success. Another positive development coming out from the euro area yesterday is that Germany now say they are open to boosting the firepower of the euro zone's rescue fund to EUR 750 billion. In return Germany wants euro zone governments to sign up to rules to cut budget deficits and public debt that are much tougher than those currently foreseen. This was known only hours after the IMF warned that the euro zone needed to boost the rescue fund to prevent the crisis from spreading to countries like Spain and Italy. Such a development could have disastrous consequences. Lagarde also call on the ECB to soften monetary policy as growth and inflation in Europe abates. The IMF will later today release new forecasts for the world economy and according to Lagarde the fund will revise their GDP estimates down for most regions. European leaders yesterday agreed on a gradual ban on all new contracts to import, buy of transport Iranian crude oil. The move is made to put pressure on Iran's much debated nuclear programme. The EU and the US believe the programme is aimed at developing nuclear weapons. Iran does on the other hand say the programme is necessary to meet its raising energy needs. The International Atomic Energy Agency did however last year say they had evidence that suggested that Iran had worked on designing nuclear weapons. Some EU states are very dependent on Iranian oil and to protect Europe's economy the EU governments agreed to phase in the embargo, giving countries with st existing contracts with Iran until July 1 to end those deals. As a response to the EU ban, many now fear that Iran will close down the important Strait of Hormuz (About 20 per cent of world oil passes the strait). The oil price rose yesterday as a response to the latest tensions between the EU and Iran. One barrel of crude oil is currently trading at about USD 111/ barrel. The increase in the oil price may be one reason why the NOK has strengthened since yesterday morning. Increased risk appetite is also positive for the Norwegian currency. Versus the euro, the Norwegian currency is currently trading at its strongest levels since September. There are few key figures on the agenda today. From the euro area, final PMI indices are released today. The indices are expected to be up compared to last month, but still likely to be below 50, which indicate declining activity. Furthermore consensus believes that euro area manufacturing orders declined in November. This also indicates slower growth ahead. The US market is looking forward towards the Federal Reserve's monetary policy meeting which starts today. This is a two day meeting, thus the outcome and the following press conference will not be before tomorrow. The committee will then, for the first time, release a forecast for the key policy rate. This will probably not be an official rate path from the FOMC, but rather a path averaging the members' forecasts, with paths for the lowest and highest projections. camilla.viland@dnb.no As of Unit Yesterday's key economic events (GMT) 07:45 France INSEE sentiment Jan Index 17:00 EMU Eurogroup Finance Minister meeting Prior 94 Poll 95 Actual 91 DNB

SEK & 3m STIBOR 9.3 9.1 8.9 8.7 14-Dec 3-Jan

2.80 2.70 2.60 2.50 2.40 23-Jan

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

55 21 95 80 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 Unit Prior Poll Todays key economic events (GMT) 09:58 EMU PMI, total Jan Index 48.3 48.4 11:00 EMU Manuf. orders Nov m/m % 1.8 -2.2 Global IMF: World Economic Outlook, GFSR og Fiscal Monitor - Updates

Morning Report
24.01.2012

SPOT RATES AND FORECASTS

3-Jan

NOK TW I ra.

EUR vs GBP & CHF 1.25 0.85 0.84 1.20 0.83 1.15 0.82 0.81 1.10 14-Dec 3-Jan 23-Jan
GBP r.a CHF

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

Prior 77.01 1.303 0.837 1.208 7.632 8.777 7.436 5.856 7.609 0.871 9.121 6.740 8.758 1.150 10.491

Last 77.03 1.302 0.837 1.208 7.634 8.786 7.436 5.869 7.622 0.870 9.129 6.751 8.771 1.151 10.503

% 0.0% -0.1% 0.0% 0.0% 0.0% 0.1% 0.0% 0.2% 0.2% -0.1% 0.1% 0.2% 0.1% 0.1% 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 1.0502 1.0087 0.9277 19.48 5.7147 1.5554 7.7609 123.57 0.2786 2.6538 0.5369 0.8107 3.2921 1.2676 30.8838

% -0.33% 0.10% 0.08% -0.01% 0.13% -0.13% 0.01% 0.10% -0.04% 0.10% 0.00% 0.05% 0.22% 0.06% -0.04%

EURSEK & OMXS 9.2 9.1 9.0 8.9 8.8 14-Dec 500 450 400 350 23-Jan

3-Jan

OMXS ra. EURSEK

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

NIBOR Prior 2.30 2.65 2.93 3.12 2.75 3.05 3.32 3.57

SWAP AND MONEYM ARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.29 2.33 2.33 0.72 2.67 2.60 2.60 1.13 2.94 2.67 2.67 1.43 3.11 2.72 2.73 1.62 2.74 1.91 1.91 1.27 3.05 2.09 2.09 1.68 3.32 2.29 2.29 2.06 3.56 2.44 2.44 2.42

Last 0.70 1.11 1.42 1.61 1.26 1.67 2.05 2.42

USD LIBOR Prior 0.28 0.56 0.79 0.95 0.71 1.22 1.71 2.17

Last 0.28 0.56 0.79 0.94 0.72 1.23 1.72 2.17

Gov. Bonds, 10y 2.00 1.75 3.00 2.50 2.00

1.50 1.50 14-Dec 3-Jan 23-Jan

10y 10y yield vs bund

NORWAY Prior Last 115.25 111.50 2.33 2.36 0.36 0.39

GOVERNMENT BONDS SWEDEN GERMANY US Prior Last Prior Last Prior 115.585 115.59 100.083 100.30 99.484375 1.83 1.83 1.97 1.97 2.06 -0.13 -0.13 0.09

Last 99.55 2.06 0.10

JPY and DowJones 79 13 78 12 77 11 76 10 75 14-Dec 3-Jan 23-Jan

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY 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 swap 0.55 2.25 0.55 2.50 0.50 3.00

USD and gold 1900 1.42 1800 1.38 1700 1.34 1600 1.30 1500 1.26 14-Dec 3-Jan 23-Jan
EURU SD ra. Gold

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

3m 2.56 2.32 2.24 2.25 3m 2.32 1.98 1.73 1.67

Prior 2.56 2.31 2.25 2.26 Prior 2.31 1.99 1.74 1.66

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

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 95.50 0.05 Dow Jones 12,708.8 -0.1% SEK 116.36 0.03 Nasdaq 2,784.2 -0.1% EUR 102.43 0.00 FTSE100 5,782.6 0.9% USD 79.81 0.04 Eurostoxx50 2,441.4 0.6% GBP 80.80 - 0.0 Dax 6,436.6 0.5% Comm. Today Last Nikkei225 8,785.3 0.0% Brent spot 110.0 110.0 Oslo 398.20 0.5% Brent 1m 110.8 110.6 Stockholm 479.05 0.7% Spot gold 1675.5 1675.5 Copenhagen 526.55 0.2% Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
24.01.2012
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