Morning Report

14.06.2013

Positive data from the US

NOK & 3m NIBOR 7.70 1.90 1.85 7.60 1.80 7.50 1.75 7.40 1.70 7.30 1.65 14-May 30-May 14-Jun
EURNOK 3m (rha)

Yesterdays data from the US came in on the positive side. Retail sales expanded more than expected, while initial claims dropped more than expected. The markets reacted positively, with equities strengthening in the US yesterday and in Asia today. Retail sales in the US expanded at a somewhat faster pace than expected in May. Whereas consensus had expected a monthly increase of 0.4 percent, actual growth came in at 0.6 percent. However, these data have a tendency of being somewhat volatile, and after adjusting for sales of vehicles, gas and construction materials, sales expanded by 0.3 percent. This is one tick up from April, and might be an indication of somewhat better development in private consumption in May. In April real growth came in at 0.1 percent, which was down from an average growth of 0.3 percent in the preceding three months. Initial claims (also from the US) declined by 19' to 334' last week. Apart from the two weeks around month end in April, this was the lowest reading for claims since January 2008. At face value this indicates a further improvement in labor market conditions (the current level is consistent with an unemployment rate close to 6 percent). Last week we got data for new jobs and unemployment, where the former showed a healthy increase (+175'), while the latter increased one tick to 7.6 percent. This should not be taken too negatively though, as it was a result of an increase in the labor force rather than a drop in employment. We're quite optimistic regarding the development in the US labor market, and we expect that the unemployment rate will have declined to about 6.5 percent by next summer . If this materializes it is of course very positive and clear indications of a substantial improvement in the labor market. But a substantial improvement is not the same as saying that all the problems are gone. According to Bureau of Labor Statistics, there are nearly 10 million involuntary part-time workers. This is an extremely high level, about twice as much as before the crisis, and there has barely been any improvement since the peak at 11 million three years ago. Moreover, these 10 million workers come in addition to the 12 million workers who are unable to get a job at all. Both Governor Ben Bernanke and Vice-Governor Janet Yellen have emphasized these data in several speeches in the past few months, and this is undoubtedly a number that will be added some weight when the FOMC in the coming months will evaluate whether the economy is prepared for a somewhat less aggressive monetary policy, ie if the economic rebound can sustain a reduction of the Feds monthly asset purchases. We maintain our view that the Fed will taper its purchases from September, albeit slowly, but a premise for this is that the labor market continues to improve in the coming months. The positive data from the US lifted equities in the US yesterday and in Asia today. S&P 500 closed 1.5 percent up, while Nikkei thus far today is up 3.5 percent. The latter should, however, be seen against the substantial drop equity prices in Japan on Thursday, when Nikkei ended with 6.8 percent in red. Movements in the FX markets have been mostly moderate, with the dollar strengthening against both the euro and the yen. EURUSD is down 0.1 percent while USDJPY is up 0.6 percent. The Norwegian krone traded somewhat higher, with an appreciation of 0.2 percent against both the dollar and the euro. Today Norges Banks regional network 2/13 will be published. Business and community leaders are asked about financial developments in their enterprises and industries, and the survey has proven to be very important input to the central banks assessment of the current business cycle situation. We expect the enterprises to report that output growth has slowed moderately in the last three months. Later Eurostat will publish final data for consumer price growth in the euro zone, which is expected to be 1.4 percent, up from 1.2 percent in April. At last we get industrial output from the US, which is expected to show an increase of 0.2 percent from April to May, after a drop of 0.5 percent in April. ole.kjennerud@dnb.no

Norw ay: 10y Gov't Bond 2.5 85 2.4 80 2.3 75 2.2 70 2.1 2.0 65 14-May 30-May 14-Jun
Rate 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

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 64 76 30 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

Yesterdays key economic events (GMT) As of 12:30 US Retail sales May 12:30 US Initial claims W23 14:00 US Business inventories Apr As of Todays key economic events (GMT) 09:00 Norway Norges Banks Regional Network 2/13 10:00 EMU CPI, final May 14:15 US Industrial output May

Unit m/m % 1000 m/m % Unit y/y % m/m %

Prior 0.1 346 -0.1 Prior 1.2 -0.5

Poll 0.4 345 0.1 Poll 1.4 0.3

Actual 0.6 334 0.2 DNB

Morning Report
14.06.2013

3m LIBOR
0.135 0.130 0.125 0.120 0.115 0.110 0.105 14-May
EUR

30-May

0.28 0.28 0.27 0.27 0.27 14-Jun

USD (rha)

Oil price & NOK TWI 94 110 93 105 92 100 91 90 95 14-May 30-May 14-Jun
NOK TWI 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 94.51 1.3360 0.8519 7.4589 8.7036 1.2267 7.6942 5.7591 6.09 88.45 103.18 9.032 6.272

Today 95.31 1.3347 0.8500 7.4593 8.6614 1.2332 7.6750 5.7501 6.04 88.70 102.92 9.032 6.227

Spot rates and forecasts In 1m Aug-13 Nov-13 May-14 FX 0700 0.8 102 105 107 110 AUD -0.1 1.27 1.26 1.30 1.32 CAD -0.2 0.85 0.85 0.86 0.87 CHF 0.0 7.45 7.45 7.45 7.45 CZK -0.5 8.55 8.45 8.50 8.60 RUB 0.5 1.24 1.25 1.27 1.30 GBP -0.2 7.55 7.50 7.45 7.40 HKD -0.2 5.94 5.95 5.73 5.61 KWD -1.0 5.83 5.67 5.36 5.10 LTL 0.3 88.3 88.8 87.6 86.0 LVL -0.3 101.3 100.7 100.0 99.3 NZD 0.0 8.88 8.82 8.66 8.51 SEK -0.7 608.87 600.00 586.61 569.23 SGD

USD NOK 0.959 5.513 1.018 5.647 0.924 622.214 19.217 29.914 32.000 17.964 1.570 9.027 7.764 0.740 0.283 20.297 2.582 2.226 0.526 10.932 0.806 4.631 6.488 88.609 1.253 4.589

US dollar 6.0 5.9 5.9 5.8 5.8 5.7 5.7 14-May 1.35 1.33 1.31 1.29 1.27 1.25 14-Jun
EURUSD(rha)

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

Prior 1.68 1.76 1.86 2.02 2.21 2.57 2.88 3.20

Last 1.68 1.77 1.87 2.02 2.18 2.53 2.83 3.16

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

Prior 1.18 1.23 1.28 1.55 1.89 2.16 2.43

Interest rates Last USD 1.18 1m 1.23 3m 1.28 6m #N/A 12m 1.56 3y 1.90 5y 2.18 7y 2.45 10y

Prior 0.19 0.27 0.41 0.68 0.72 1.31 1.82 2.38

Last 0.19 0.27 0.41 0.68 0.69 1.27 1.78 2.33

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

Prior 0.06 0.13 0.23 0.44 0.71 1.10 1.45 1.87

Last 0.06 0.13 0.23 0.44 0.70 1.08 1.43 1.84 Last 99.42 1.56 -0.59 10y sw ap 1.75 1.75 2.00

30-May

USDNOK

105.0 100.0
95.0

Japanese yen

90.0 14-May
USDJ PY

30-May

7.0 6.5 6.0 5.5 5.0 14-Jun

Norw ay Prior NST475 96.40 10y yld 2.41 - US spread 0.21 3m nibor 1.80 1.80 1.80

Norw ay Aug-13 Nov-13 May-14

Governm ent bonds Last SEK Prior Last US Prior 96.70 10y 95.83 95.83 10y 96.00 2.38 10y yld 1.95 1.95 10y yld 2.20 0.22 - US spread -0.25 -0.21 30y yld 3.34 Interest rate forecasts 10y 10y Sw eden 3m libor USA 3m libor sw ap sw ap 3.25 3.25 3.50 Aug-13 Nov-13 May-14 1.20 1.20 1.45 2.25 2.25 2.50 Aug-13 Nov-13 May-14 0.35 0.35 0.35

Last Germany Prior 96.38 10y 99.11 2.16 10y yld 1.60 3.33 - US spread -0.60 10y sw ap 2.00 2.00 2.50 3m euribor 0.25 0.25 0.25

Germany Aug-13 Nov-13 May-14

JPYNOK(rha)

SEKNOK & CHFNOK 90 6.3 89 6.2 89 6.1 88 6.0 88 5.9 87 5.8 14-May 30-May 14-Jun
SEKNOK CHFNOK (rha)

Equities
15700 15200 14700 14200 13700 14May
Dow Jones

30May

500 490 480 470 460 450 14-Jun

Os lo (rha)

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

Miscellaneous Prior Last Change Maturity year rem. NOK-index TWI Prior 1.42 1.45 3 18.09.2013 0.26 Last 93.39 93.50 1.47 1.49 2 18.12.2013 0.51 Oil price: (Ldn,cl) 1m 1.47 1.51 4 19.03.2014 0.76 SPOT 104.18 104.72 1.45 1.41 -4 15.05.2015 1.92 Gold price 13.06.2013 PM 1.80 1.75 -5 19.05.2017 3.93 AM: 1382.8 1385.0 0.00 0.00 0 24.05.2023 9.95 Equities Today 0700 % last 2.39 2.36 -3 24.05.2023 9.95 Dow Jones 15176.08 1.2% 2.41 2.38 -3 24.05.2023 9.95 Nasdaq C. 3445.37 1.3% 3 mnd 6 mnd NOK NIDR NIBOR FTSE100 6304.63 0.1% 1.79 1.90 1m 1.77 1.68 Eurostoxx50 2661.71 -0.2% 1.79 1.91 3m 1.87 1.77 DAX 8095.39 -0.6% 1.82 1.94 6m 1.93 1.87 Nikkei 225 12894.36 3.6% 1.85 1.99 12m 2.08 2.02 OSEBX 472.86 -0.2% Sources to all tables and graphics: Thomson Reuters, Thomson Datastream and DNB Markets

Morning Report
14.06.2013
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