Morning Report

21.02.2012

Greek bail-out approved

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

The Greek bail-out is signed by European finance ministers, after negotiations that have gone on all night.
3.20 2.90 2.60 2.30

11-Jan 31-Jan 20-Feb

EURNOK

SEK & 3m STIBOR 9.0 8.9 8.8 8.7

3m ra.

2.70 2.60 2.50 2.40 2.30

EURSEK

This morning the Eurogroup, consisting of Ministers of Finance in the euro zone, approved the 130 bn euro bail-out to Greece, after 13 hours of negotiations. Along with extensive private sector haircuts on Greek debt and contributions from European central banks it is supposed to bring the Greek debt burden down to 120.5 per cent of GDP in 2020. This is only marginally above the level that the IMF has defined as sustainable (120 per cent), a prerequisite for IMF's ability to contribute to the bail-out. According to Eurogroup president Jean-Claude Juncker it will "secure Greece's future in the euro area". Euro members were not willing to increase the previously agreed bail-out amount, even after they received a report concluding that financing needs were even larger than anticipated to get the debt burden down to 120 per cent in 2020. Hence, private creditors had to accept even larger "voluntary" haircuts than before. The agreed nominal haircut is at 53.5 percent, or about 100 billion euros. This is an increase from the 50 per cent that was agreed upon in October. A major obstacle has been exceeded, but uncertainties remain regarding the PSI (Private Sector Involvement) participation rate. How many of the private bondholders will choose to swap their bonds for securities with longer maturities and lower interest rates? Eurogroup president Jean-Claude Juncker said at the news conference this morning that he expects the participation rate to be high. If he is wrong, the entire agreement is in danger. The PSI operation is expected to be finalized by 12 March. The Eurosystem will also contribute. The ECB profits on holdings of Greek government bonds through its Securities Market Program will be disbursed to the national central banks, in line with the ECB's statutory profit distribution rules. According to Reuters, the value of the bonds has increased from 38 billion to 50 billion euros since the start of the program. The national central banks' profit will be disbursed to euro area member states in line with the central banks' statutory profit distribution rules. A classified report that the Troika (ECB/IMF/EU) received last week has leaked to Reuters and Financial Times. Its contents underscore the inadequacy of the rescue package in the longer term. In the main scenario the Greek economy falls by 4.3 per cent this year, but stabilizes next year, and grows by 2.3 per cent in 2014 and 2.9 per cent in 2015. A scenario with a deeper recession, in the report described as a consequence of delays in economic reforms and savings, will bring the debt level up to 180 per cent in 2015, before it subsides again (due to higher growth, fiscal tightening and privatization) to 160 per cent in 2020, the same level as today. That the Greeks fail to deliver is not an unrealistic assumption. We do not regard the Greek debt level as sustainable even after this agreement. If the Greeks are able to deliver the cuts that are deep enough, this could weaken the economy so much that the debt burden paradoxically increases. The markets do not seem too excited about the agreement. After another day of recovery in global equity markets and long-term government bond yields yesterday, the Nikkei index slid slightly after opening today. Much of the optimism has been taken out in advance. The euro has strengthened further against both the dollar and the pound sterling. The Norwegian krone remains at a strong level (EURNOK is currently trading around 7.51, and the Swedish krona has strengthened. The Japanese yen continues to weaken, to a level against the dollar which is the weakest in six months. Today euro zone consumer confidence in February and the activity index from Chicago Fed are released. Norwegian central bank governor Olsen speaks to the Norwegian Foreign Press Association today, his first appearance after the Annual Speech on Thursday. Today's speech will not published but Olsen will probably face many questions regarding his views on monetary policy and the NOK, in the wake of the krone appreciation in the wake of his speech last week. kjersti.haugland@dnb.no

11-Jan 31-Jan 20-Feb

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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 Yesterday's key economic events (GMT) 07:45 France INSEE business conf. Feb Index As of Unit Todays key economic events (GMT) 07:00 EMU ECOFIN meeting 08:00 Norway ystein Olsen speech, Foreign Press Association 13:30 USA Chicago Fed activity Jan Index 15:00 EMU Consumer confidence Feb Index

Prior 91.0 Prior

Poll 92.0 Poll

Actual 92.0 DNB

0.2 20.6

Morning Report
21.02.2012

SPOT RATES AND FORECASTS

Oil spot & NOK TWI 124 120 116 112 108 104 100
NOK TWI ra.

102 100 98 96 94 92
$/b

11-Jan 31-Jan 20-Feb

EUR vs GBP & CHF 1.25 1.20 1.15 1.10

GBP r.a

0.85 0.84 0.83 0.82 0.81

CHF

11-Jan 31-Jan 20-Feb

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

Prior 79.66 1.324 0.836 1.207 7.508 8.818 7.434 5.670 7.126 0.853 8.985 6.666 8.366 1.174 10.556

Last 79.83 1.326 0.837 1.207 7.516 8.820 7.434 5.673 7.107 0.853 8.990 6.655 8.340 1.174 10.546

% 0.2% 0.1% 0.1% 0.0% 0.1% 0.0% 0.0% 0.1% -0.3% 0.0% 0.1% -0.2% -0.3% 0.0% -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 1.0722 0.9943 0.9112 18.81 5.6094 1.5844 7.7550 123.34 0.2781 2.6055 0.5271 0.8381 3.1482 1.2542 29.8150

% -0.31% 0.03% -0.10% -0.08% -0.14% -0.02% 0.01% -0.04% -0.01% -0.13% -0.09% -0.14% -0.19% 0.11% 0.06%

EURSEK & OMXS 9.0 8.9 8.8 8.7 11-Jan

OMXS ra. EURSEK

550 500 450 400 350 31-Jan 20-Feb

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

NIB OR Prior 2.26 2.66 3.02 3.26 2.99 3.25 3.50 3.69

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 2.26 2.06 2.07 0.55 2.67 2.35 2.37 0.97 3.03 2.53 2.53 1.29 3.25 2.62 2.62 1.48 3.00 1.98 1.99 1.26 3.26 2.16 2.16 1.63 3.49 2.36 2.36 1.99 3.70 2.55 2.55 2.35

Last 0.54 0.96 1.29 1.47 1.28 1.64 2.00 2.37

USD LIBOR Prior 0.25 0.49 0.75 0.90 0.72 1.17 1.62 2.08

Last 0.25 0.49 0.75 0.90 0.73 1.18 1.63 2.11

Gov. Bonds, 10y 2.00 1.75 1.50

NOK, ra.

3.00 2.50 2.00 1.50

SEK

11-Jan 31-Jan 20-Feb

10y 10y yield vs bund

NORWAY Prior Last 114.85 111.10 2.41 2.40 0.46 0.43

GOVERNMENT BONDS SWEDEN GERMANY Prior Last Prior Last 114.256 114.26 100.309 100.28 1.96 1.95 1.96 1.97 0.00 -0.01

US Prior 100 2.00 0.04

Last 99.69 2.05 0.08

JPY and DowJones 80 14 79 13 78 12 77 11 76 10 75 11-Jan 31-Jan 20-Feb

USDJPY ra. DowJones, 1000

In 3m 6m 12m

INTEREST RATE FORECASTS NORWAY SWEDEN GERMANY 3m nibor 10y swap 3m stibor 10y swap 3m euribor 10y swap 2.65 3.50 2.40 2.25 1.05 2.50 2.55 3.75 2.20 2.50 1.05 2.75 2.60 4.25 2.00 3.00 1.05 3.25

US 3m libor 10y swap 0.50 2.25 0.50 2.50 0.50 3.00

USD and gold 1.42 1900 1.38 1800 1.34 1700 1.30 1600 1.26 1500 11-Jan 31-Jan 20-Feb
EURUSD ra. Gold

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

3m 2.63 2.52 2.51 2.54 3m 2.25 1.97 1.80 1.76

Prior 2.64 2.52 2.52 2.54 Prior 2.25 1.98 1.80 1.76

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

MISCELLANEOUS TWI Today % Stock ex. Today % NOK 94.01 0.06 Dow Jones : SEK 116.84 0.11 Nasdaq : EUR 104.11 0.32 FTSE100 5,945.3 0.7% USD 78.98 - 0.23 Eurostoxx50 2,550.3 1.2% GBP 81.20 Dax 6,948.3 1.5% Comm. Today Last Nikkei225 9,463.0 0.0% Brent spot 122.9 122.9 Oslo 426.03 1.3% Brent 1m 120.0 120.1 Stockholm 509.54 1.0% 1.4% Spot gold 0.0 1733.0 Copenhagen 591.06 Sources to all tables and graphics: Reuters and DNB Markets

Morning Report
21.02.2012
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