Morning Report

24.04.2013

NOK-depreciation in April
NOK & 3m NIBOR 7.70 1.90 7.60 1.85 7.50 1.80 7.40 1.75 7.30 1.70 21-Mar 09-Apr 24-Apr
EURNOK 3m (rha)

Norw ay: 10y Gov't Bond 2.3 100

2.2
2.1

90
80 21-Mar
Rate

2.0
09-Apr

70 24-Apr
Diff (bp, rha)

Headquarter Dronning Eufemias gate 30 0191 Oslo Offices Abroad New York London Singapore Stockholm Sales Oslo (+47) Equity Fixed Income Regional Sales (+47) Bergen Bod Fredrikstad Hamar Lillehammer Kristiansand Oslo Stavanger Troms Trondheim Tnsberg lesund Private Clients Research Regional Sales (+47) Eirik Larsen Research FX/IR (+47) ystein Drum Kjersti Haugland Ole Andr Kjennerud Knut A. Magnussen Camilla Viland Magne stnor Kyrre Aamdal Credit Research (+47) Ole Einar Stokstad Martin Brter Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen Kristina Solbakken Magnus Vie Sundal

+47 03000

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

The krone has depreciated markedly against the euro so far in April, to the weakest levels since early 2012. Currently EURNOK trades just below 7.70, an increase of 0.7 per cent since yesterday morning. As the left graph shows the EURNOK has risen steadily since 10 April. At that date Statistics Norway released March inflation figures, showing inflation was lower than Norges Bank projections, and it was pointed out that the chances of rate cut increased. In the markets interest rates did not change so much. The market has for a while priced a probability at about 50 per cent for an interest rate cut this summer. With the decline we have seen for the NOK in the past week this probability should decrease. The depreciation is probably due to a combination of several factors, where low inflation figures are one item. Another element is the fluctuations in oil prices. It fell from 111 USD/barrel to 97 USD/barrel during the first two weeks of April. It may have been a reminder that the NOK is exposed to oil price volatility and investors with large NOK positions may have attempted to reduce these. There has also been a significant weakening of the Swedish krona against the euro, actually an even larger decline than Norwegian kroner. Swedish Krona was particularly influenced by the Riksbank's new, lower interest rate path, but the decline started several days before the monetary policy meeting and continued in the days after. There can thus be common factors behind the weakening of both the Norwegian and Swedish currencies. For Norwegian kroner it has also been noted that redemption in Norwegian government bonds in May, along with coupon payments and also a time of much of dividend payments, may lead to substantial disposable NOK in the markets. Redemptions are probably to a large extent reinvested, but it is nevertheless a higher chance of increased sales NOK in May. It is difficult to determine which of these factors have had the greatest influence. Earlier this year, we have seen analysts have estimated a significant strengthening of the krone, and it seems that many foreign investors have positioned themselves for NOK appreciation. NOK weakening has then triggered stoplosses and thus contributed to further NOK sales and NOK depreciation. It is not unusual for the krone to depreciate sharply and relatively substantially, while strengthening occurs more gradually. With the weakest NOK against the Euro since the start of 2012 the chance that many see this as good levels for new NOK positions has increased. The Financial Supervisory Authority of Norway, FSA, presented yesterday its report "Risk Outlook 2013", which summarizes the state of the financial markets and outlook. FSA believes that the Norwegian economy is strong and the outlook is good. The favourable trend seen in Norway over the past three years is due in part to a sharp improvement in the terms of trade. But the Norwegian economy is thus vulnerable to deterioration in the terms of trade. The FSA believes that oil prices are particularly important: "A lasting decline in the oil price will result in low activity in the petroleum sector, and will hit Norwegian firms that deliver goods and services to the petroleum industry both on the Norwegian shelf and abroad." Lower oil prices coupled with a weaker global economy can lead Norwegian economy into a recession. The FSA is also concerned that house prices and household debt is growing faster than incomes. The FSA governor, Morten Baltzersen, stated the following: "Expectations of households of sustained low interest rates, high employment, high oil prices and strong revenue growth could easily turn to pessimism and economic slowdown. Weakened confidence in the Norwegian economy may lead to a fall in house prices or reinforce a progressive decline, and trigger a major financial consolidation in the household sector. The ripple effects to the rest of the economy can be large, and banks' loan losses will increase." Still, earnings at banks is good, and loan losses are low, according to the FSA. The FSA points out that it provides a good starting point to strengthen the solidity further in the years ahead in line with new capital requirements. FSA will use the opportunities for national adaptations to ensure that Norwegian banks are well capitalized and liquid. The flash estimate for the PMI in the euro zone was, as expected, unchanged from March to April for the overall index. The April figure was lower than the average for the first quarter. It points to a further decline in GDP in the second quarter unless PMIs improve markedly ahead. Most attention was given to the German PMI that fell 1.8 points to 48.8, and is thus under 50 for the first time since last November. This may mean that the German activity decreases in the second quarter. France recorded an increase of 2.3 points, but the level is still extremely low: 44.2. France, together with Greece, had the lowest PMI index for the euro area. INSEE index of France, who also arrived yesterday, showed a decrease from 90 to 88 and production outlook fell substantially more. kyrre.aamdal@dnb.no Yesterdays key economic events (GMT) 07:58 EMU PMI, flash 14:00 USA New home sales Todays key economic events (GMT) 08:00 Germany IFO 12:30 USA Durable orders As of Apr Mar As of Apr Mar Unit Index Mill. Unit Index m/m, % Prior 46.5 0.411 Prior 106.7 5.6 Poll 46.5 0.420 Poll 106.2 -1.9 Actual
46.5 0.417

22 94 89 40 24 16 90 30

56 13 27 20 75 52 99 10 69 39 41 50 62 54 14 82 61 24 79 56 38 14 61 64 24 16 90 80 51 84 04 30 77 62 96 80 73 87 49 73 33 01 73 80 70 11 69 85 24 16 90 90

24 16 90 77

24 16 90 08 24 16 90 03 24 16 90 07 24 16 90 04 24 16 90 01 24 16 90 06 24 16 90 02

24 16 90 48 24 16 90 46 24 16 90 47 24 16 90 49 24 16 90 44 24 16 90 45 24 16 90 51 24 16 91 23

DNB

Morning Report
24.04.2013

3m LIBOR
0.140 0.135 0.130 0.125 0.120 0.115 21-Mar
EUR

09-Apr

0.29 0.29 0.28 0.28 0.27 24-Apr

USD (rha)

Oil price & NOK TWI

94 93 92 91 90 110

105
100

21-Mar

09-Apr

95 24-Apr
USD/b (rha)

FX 0700 USD/JPY EUR/USD EUR/GBP EUR/DKK EUR/SEK EUR/CHF EUR/NOK USD/NOK JPY/NOK SEK/NOK DKK/NOK GBP/NOK CHF/NOK

Last 98.79 1.3041 0.8545 7.4545 8.5481 1.2204 7.6450 5.8645 5.94 89.48 102.61 8.952 6.267

Today 99.39 1.2998 0.8527 7.4555 8.6392 1.2298 7.6995 5.9230 5.96 89.17 103.27 9.031 6.262

Spot rates and forecasts In 1m Jul-13 Oct-13 Apr-14 FX 0700 0.6 98 100 105 110 AUD -0.3 1.30 1.32 1.33 1.34 CAD -0.2 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK 1.1 8.50 8.45 8.50 8.60 RUB 0.8 1.22 1.22 1.25 1.27 GBP 0.7 7.55 7.50 7.45 7.40 HKD 1.0 5.81 5.68 5.60 5.52 KWD 0.4 5.93 5.68 5.33 5.02 LTL -0.3 88.8 88.8 87.6 86.0 LVL 0.6 101.3 100.7 100.0 99.3 NZD 0.9 8.88 8.82 8.66 8.51 SEK -0.1 618.85 614.75 596.00 582.68 SGD

USD NOK 1.025 6.073 1.027 5.770 0.946 626.027 19.950 29.687 31.618 18.731 1.525 9.029 7.765 0.763 0.285 20.759 2.656 2.230 0.539 10.986 0.844 5.001 6.644 89.137 1.241 4.772

NOK TWI

US dollar

6.0 5.8 5.6 5.4 21-Mar

1.35 1.30
09-Apr

1.25 24-Apr
EURUSD(rha)

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

Prior 1.72 1.79 1.88 2.05 1.97 2.29 2.62 2.99

Last 1.70 1.77 1.86 2.06 1.95 2.27 2.61 2.97

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

Prior 1.15 1.23 1.30 #N/A 1.32 1.54 1.80 2.05

Interest rates Last USD 1.15 1m 1.23 3m 1.30 6m #N/A 12m 1.32 3y 1.55 5y 1.80 7y 2.05 10y

Prior 0.20 0.28 0.43 0.72 0.45 0.84 1.29 1.84

Last 0.20 0.28 0.43 0.71 0.45 0.84 1.30 1.86

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

Prior 0.06 0.13 0.22 0.41 0.49 0.77 1.10 1.52

Last 0.06 0.13 0.21 0.41 0.48 0.76 1.09 1.51

USDNOK

Japanese yen 105.0 7.0 100.0 95.0 6.0 90.0 85.0 5.0 21-Mar 09-Apr 24-Apr
USDJ PY JPYNOK(rha)

Norw ay Prior NST475 99.45 10y yld 2.06 - US spread 0.38 3m nibor 1.80 1.80 1.80

Norw ay Jul-13 Oct-13 Apr-14

Governm ent bonds Last SEK Prior Last US Prior 99.40 10y 99.31 99.31 10y 102.86 2.07 10y yld 1.57 1.57 10y yld 1.68 0.37 - US spread -0.11 -0.13 30y yld 2.86 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Jul-13 Oct-13 Apr-14 1.20 1.20 1.20 2.25 2.25 2.50 Jul-13 Oct-13 Apr-14 0.35 0.35 0.35

Last Germany Prior Last 102.67 10y 102.45 102.24 1.70 10y yld 1.23 1.26 2.90 - US spread -0.45 -0.45 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25 10y sw ap 1.75 1.75 2.00

Germany Jul-13 Oct-13 Apr-14

SEKNOK & CHFNOK 91 6.3

90
89

6.2
6.1

88 21-Mar 09-Apr
SEKNOK

6.0 24-Apr
CHFNOK (rha)

Equities
15200

14700 14200
13700 21-Mar 09-Apr

480 470 460 450 440 24-Apr

Os lo (rha)

NOK sov. NST20 NST21 NST22 NST471 NST472 NST473 NST475 NST475 NOK FRA JUN SEP DEC MAR

Dow Jones

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.56 1.57 1 18.09.2013 0.40 Last 93.73 93.46 1.55 1.56 1 18.12.2013 0.65 Oil price: (Ldn,cl) 1m 1.62 1.55 -7 19.03.2014 0.90 SPOT 100.12 100.64 1.20 1.19 -1 15.05.2015 2.06 Gold price 23.04.2013 PM 1.30 1.32 1 19.05.2017 4.07 AM: 1424.5 1408.0 1.51 1.53 2 22.05.2019 6.08 Equities Today 0700 % last 2.04 2.06 2 24.05.2023 10.09 Dow Jones 14719.46 1.1% 2.06 2.07 1 24.05.2023 10.09 Nasdaq C. 3269.33 1.1% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6406.12 2.0% 1.73 1.82 1m 1.81 1.70 Eurostoxx50 2662.88 3.1% 1.69 1.78 3m 1.90 1.77 DAX 7658.21 2.4% 1.69 1.79 6m 1.95 1.86 Nikkei 225 13748.39 1.6% 1.69 1.81 12m 2.08 2.06 OSEBX 471.37 1.4% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
24.04.2013
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