Morning Report

08.03.2012

Fateful Day for Greece

2.90 2.60 2.30

Three days of falling stock markets fuelled speculation about a new wave of depression in the financial markets, but yesterday's development has so far subdued such speculation. Today, Greek PSI is the major event. The S&P 500 increased by 0.7 per cent and volatility declined slightly yesterday. In Europe the Eurostoxx50 rose with the same amount, while the FTSE 100 was up 0.4 per cent. The Benchmark index on the Oslo Stock Exchange was up 1.2 per cent. In Asia, the rise continues today with Nikkei 225 up 2 per cent and Hong Kong by 1.2 per cent. Interest rates on U.S. government debt rose slightly yesterday, but 10y Treasury yield increased only 2 bps. In the currency markets the dollar strengthened against the euro during the first part of the day yesterday, but the trend was reversed in the afternoon. This morning EURUSD trades 0.2 per cent higher than yesterday morning and 0.6 per cent above the bottom yesterday. Against the Japanese yen, the dollar appreciated 0.8 per cent since yesterday morning. EURNOK has declined 0.6 per cent in the past day and the crown is in the morning around 7.43 EURNOK. Swedish krona has fallen back slightly against the euro and SEKNOK now stands at 83.3, 0.9 percent lower than yesterday morning. The ADP figures showed that employment in the U.S. private sector increased by 216' in February. It was about as expected, but slightly below expectations for Friday's non-farm payrolls for the private sector. On the other hand, there was a marked increase from January and ADP figures for January were lower than the corresponding figures from the BLS. Overall, the figures show that the labour market is improving and the increase was broadly based. The figures were well received in the markets. Today's both the English and European central banks hold monetary policy meetings. It is not expected policy changes in any of them, but many look forward to hear ECB's assessments of the latest LTRO. But the main event today is whether the PSI in Greece will gain sufficient support. Last summer, the EU/IMF/ECB and the Greek authorities agreed that the private sector should contribute to debt reduction for Greece. This was called Private Sector Involvement (PSI). The plan included several elements in which net present value of the private investors' loan to Greece would be reduced by 21 per cent. It soon became apparent that it would be a beneficial arrangement for many of the investors. Besides, but not less important the debt reduction would not be sufficient. In late November, the parties agreed on a revised PSI solution that gave reductions in the present values of at least 50 per cent. A target that the Greek debt level would fall to 120 percent of GDP in 2020 was set. But negotiations continued and the last offer to the private investors includes borrowers with 206 billion in Greek government debt, which must cede 53.5 per cent of the nominal value of existing loans. The remaining values will be swapped partly to new long-term loans (maturity of up to 2042) and partly to short-term commercial paper. The long-term loans start with 2 per cent interest rates but it increases to 4.3 per cent in ten years. The first repayment will not take place before 2023. The package also includes a scheme for GDP-linked debt, which means that interest rates will be higher if GDP growth exceeds a certain value. Overall, the offer means that the present value of the private investors' debt is reduced by about 75 per cent. Greek banks will be refunded as part of the package. The deadline for private investors to accept the offer is 20 GTM today. In February this year the Greek Parliament adopted the so-called Collective Action Clauses (CAC) with retroactive effect, so that all lenders can be forced into the deal. A prerequisite for use of the CAC is that at least two-thirds consent to the agreement. If 91 per cent of the private investors accept the offer, the 100 debt reduction target will be met. With 66-90 per cent acceptance the CAC may be used. If so, this would likely be perceived as a credit event that triggers CDSs. Some reports suggest that 75 per cent participation is considered sufficient and the CAC would not be used. If less than 66 per cent say yes, the deal is off. That leaves three options: More from the "voluntary private investors", more from the official sources (not likely!), or a one-sided "bankruptcy". This morning Bloomberg reports that owners of 60 per cent of the debt have stated they will participate in the scheme. Tomorrow, the EU ministers discuss the outcome. kyrre.aamdal@dnb.no

27-Jan 16-Feb 7-Mar

SEK & 3m STIBOR 9.0 8.9 8.8 8.7 27-Jan 16-Feb

2.70 2.60 2.50 2.40 2.30 7-Mar

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Regional sales (+47) Bergen Bod Fredrikstad Hamar Haugesund Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund

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

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Yesterday's key economic events (GMT) 09:00 Norway Manufacturing production 11:00 Germany Manufacturing orders 13:15 US ADP employment Todays key economic events (GMT) 11:00 Germany Goods production, prelim. 12:00 UK BoE meeting: Base rate 12:45 EMU ECB meeting 13:30 US Initial claims

As of Jan Jan Feb As of

Unit m/m% m/m % m/m, k Unit % % 1000

Mar Week 9

Prior -0.3 1.7 170 Prior Jan 0.5 1.00 351

Poll Actual 0.5 1.1 0.5 -2.7 215 216 Poll DNB m/m % -2.9 0.5 0.5 1.00 1.00 351

Morning Report
08.03.2012

SPOT RATES AND FORECASTS

102 100 98 96 94 92 7-Mar

1.25 1.20 1.15

EUR vs GBP & CHF 0.87 0.85 0.83

1.10 0.81 27-Jan 16-Feb 7-Mar

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

Prior 81.17 1.315 0.835 1.205 7.435 8.919 7.435 5.654 6.968 0.834 8.899 6.783 8.362 1.200 10.678

Last 81.39 1.318 0.835 1.206 7.439 8.924 7.435 5.646 6.938 0.834 8.909 6.775 8.324 1.201 10.689

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

In 1 m ...3 m 77 77 1.30 1.30 0.83 0.83 1.23 1.23 7.60 7.75 8.90 9.20 7.45 7.45 5.85 5.96 7.59 7.74 0.85 0.84 9.2 9.3 6.85 7.08 5.27 5.45 1.17 1.19 10.72 11.08

...6 m ...12 m 80 85 1.35 1.40 0.85 0.87 1.23 1.30 7.65 7.65 9.00 9.00 7.45 7.45 5.67 5.46 7.08 6.43 0.85 0.85 9.0 8.8 6.67 6.43 5.33 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 1.0631 0.9958 0.9156 18.85 5.6435 1.5780 7.7643 125.57 0.2786 2.6207 0.5298 0.8231 3.1461 1.2545 29.6230

% 0.44% -0.22% -0.12% -0.27% -0.18% 0.23% 0.00% -0.14% -0.01% -0.23% -0.38% 0.82% -0.47% -0.29% -0.07%

EURSEK & OMXS 9.0 8.9 8.8 8.7 27-Jan 16-Feb 550 500 450 400 350 7-Mar

OMXS ra. EURSEK

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

N IBOR Prior 2.22 2.60 2.96 3.13 2.98 3.24 3.46 3.68

SWAP AN D MON EYM ARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.24 2.03 2.02 0.44 2.61 2.34 2.32 0.84 2.96 2.53 2.51 1.19 3.12 2.64 2.62 1.38 2.97 1.89 1.89 1.16 3.25 2.04 2.06 1.52 3.46 2.25 2.26 1.89 3.67 2.41 2.43 2.25

Last 0.43 0.82 1.18 1.37 1.18 1.54 1.90 2.27

USD LIBOR Prior 0.24 0.47 0.74 0.89 0.69 1.12 1.57 2.05

Last 0.24 0.47 0.74 0.89 0.70 1.13 1.59 2.07

Gov. Bonds, 10y 2.00 1.75 1.50

3.00 2.50 2.00 1.50

10y 10y yield vs bund

N ORWAY Prior Last 114.98 111.35 2.34 0.56 2.36 0.57

GOVERNM ENT BON DS SWEDEN GERMANY Prior Last Prior Last 115.897 115.73 101.95 101.84 1.79 0.01 1.80 0.01 1.78 1.79

US Prior 100.25 1.97 0.19

Last 100.11 2.00 0.20

27-Jan 16-Feb 7-Mar

JPY and DowJones 14 83 82 13 81 80 79 12 78 77 11 76 75 10 27-Jan 16-Feb 7-Mar

In 3m 6m 12m

INTEREST RATE FORECASTS N ORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.65 3.50 2.15 2.25 1.05 2.50 2.55 3.75 2.10 2.50 1.05 2.75 2.60 4.25 2.00 3.00 1.05 3.25

US 3m libor 10y 0.50 0.50 0.50

swap 2.25 2.50 3.00

USD and gold 1900 1800 1700 1600 1500

1.42 1.38 1.34 1.30 1.26

27-Jan 16-Feb 7-Mar

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

3m 2.61 2.50 2.48 2.51 3m 2.26 1.93 1.72 1.65

Prior 2.62 2.50 2.48 2.50 Prior 2.26 1.93 1.71 1.65

chg -0.02 0.00 0.00 0.01 chg 0.00 0.00 0.01 0.00

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 93.00 0.04 Dow Jones 12,837.3 0.6% SEK 118.20 - 0.12 Nasdaq 2,935.7 0.9% EUR 104.20 0.16 FTSE100 5,791.4 0.4% USD 79.58 - 0.16 Eurostoxx50 2,460.8 0.7% GBP 81.20 0.1 Dax 6,671.1 0.6% Comm. Today Last Nikkei225 9,769.0 0.0% Brent spot 127.3 127.3 Oslo 415.88 1.2% Brent 1m 124.8 124.1 Stockholm 486.88 0.6% 0.7% Spot gold 0.0 1677.5 Copenhagen 577.64 Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
08.03.2012
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