Ireland Returns To The Debt Markets: Morning Report

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Morning Report

20.07.2012

Ireland returns to the debt markets


NOK & 3m NIBOR 7.60 7.50 7.40 7.30
3m ra.

2.40 2.35 2.30 2.25 2.20


EURNOK

The Norwegian krone strengthened considerably yesterday. The uncertainty in the euro zone is still large, but a bright spot is that Ireland now can return to the markets. The markets are quiet nowadays, and it appears that the summer mode has struck in. But with small volumes the potential movements in prices may be large. Large movements have also been the case this week where a nearby example is the movement in Swedish krona this week. Since Monday, the Swedish krone has appreciated 1.4 percent against the euro and 1.0 percent against the Norwegian krone. This is partly due to the minutes from the last monetary policy meeting in the Riksbank, published on Tuesday, in which the central bank appeared more hawkish than the market had expected. But the development of the Swedish krona should also be seen against the sentiment in Europe. Risk appetite is low and the search for safe havens is high. If investors are able allocate a safe haven with a significant return, this will be a bonus. This is the case in Sweden for the moment, but as in other safe havens the Swedish yields have fallen significantly lately. So far in July, the yield on the Swedish 10 year bonds fell from 1.61 per cent to 1.25 per cent - a decline of 36 basis points. It has only been a matter of time before similar movements have occurred in the Norwegian krone. But yesterday this movement came, and the krone has appreciated markedly against most major currencies. EURNOK is now 0.7 percent lower than yesterday morning and is currently traded at 7.42. Although the uncertainty surrounding the euro zone to a large extent is with us, there still is occasional good news which should help lift the sentiment. Where Spain seems to struggle to gain investor confidence Ireland seems to gradually get it back. The Irish yield curve for government bonds is now about the same as Italy's. Yesterday the Irish government, represented by the National Treasury Management Agency (NTMA), outlined a plan for how to return to the markets this year. NTMA will hold 3 or 4 auctions in 2012 where it will be sold T-bills; it will be held an auction for conventional bonds; and it will be sold new instruments related to the Irish pension fund. The news that Ireland will return to the market is very positive. In many ways, Ireland is proof that a country which at one time is at the centre of a crisis, through a long-term process of structural reforms and savings are able to return to the market and turn the recession to growth. A country that should be motivated by the Irish example is Spain, where interest rates continue to rise. Yesterday the government sold 2 year bonds at an interest rate of 5.204 percent. This is almost 90 basis points higher than at a similar auction in June. In addition, the government sold 5-year bonds and 7-year bonds, which also saw a rise in interest rates. Demand for the Spanish notes was described as low. 2-year bonds were oversubscribed 1.9 times, while 5-year securities were oversubscribed 2.1 times. This was significantly lower than in June. Whereas Spanish yields increase, other peripheral yields decline. The Italy-Spain spread has flipped the 100 basis points threshold, a euro zone record for the two crisis countries. While the Spanish 10year rose 6 points yesterday, the Italian fell by almost 10 points. Otherwise, the market development has been largely positive, with an uptick in global bourses. Among other things, the Oslo Brs is up 0.6 percent since yesterday and the S&P 500 up 0.9 percent. This morning however, Asian stock markets have opened in negative territory. It wasn't much economic data of importance that was released yesterday, and for those who were released came in on the lower side of expectations. It started in the UK, with slightly disappointing retail sales. From May to June sales expanded by a mere 0.1 percent, compared with an expected increase of 0.6 percent (Reuters). This development seems to be symptomatic for the British economy, which is experiencing another year of tepid growth. In Q1 GDP fell by 0.3 percent, and IMF yesterday came with a recommendation to the British authorities do more to boost growth in the event of a slow start of 2013. IMF estimates that growth in the UK is picking up from a modest 0.2 percent this year to 1.4 percent next year. Yesterday's U.S. figures were also a bit disappointing. Initial claims increased by 34,000 to 386,000 last week. The increase is significant, but the uncertainty about the numbers is just as large. The Labor Department stated that they have problems with seasonal adjustment in July, and the figures should thus be taken with a pinch of salt. Philly Fed also disappointed somewhat, despite an increase of 3.7 points to -12.9 in July. According to Reuters, consensus had expected a rise to -8.0. One reason for the increase was an improvement in new orders, which increased by more than 10 points from June to July. ole.kjennerud@dnb.no Yesterdays key economic events (GMT) 08:30 UK Retail sales 14:00 USA Philadelphia Fed Todays key economic events (GMT) 06:00 Germany PPI As of Jun Jul As of Jun Unit m/m % Index Unit m/m % Prior 1.4 -16.6 Prior -0.3 Poll 0.6 -8.0 Poll -0.2 Actual 0.1 -12.9 DNB

11-Jun 29-Jun 19-Jul

SEK & 3m STIBOR 9.1 8.9 8.7 8.5 11-J un 29-Jun


3m ra.

2.20

2.00 19-Jul
EURSEK

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Sales Oslo (+47) Equity Fixed Income

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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 Magne stnor Kyrre Aamdal

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Credit Research (+47) Ole Einar Stokstad Mikael L. Gjerding Rolv Kristian Heitmann Thomas Larsen Knut Olav Rnningen

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Morning Report
20.07.2012

SPOT RATES AND FORECASTS


Oil spot & NOK TWI 115 105 95 85 11-J un 29-Jun 96 94 92 90 19-Jul
$/b

NOK TWI ra.

EUR vs GBP & CHF 1.20 0.82 1.20 0.81 0.80 1.20 0.79 1.20 1.20 0.78 11-Jun 29-Jun 19-Jul
GBP r.a CHF

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

Prior 78.62 1.228 0.781 1.201 7.441 8.504 7.439 6.058 7.710 0.875 9.528 6.922 8.823 1.143 10.902

Last 78.60 1.229 0.785 1.201 7.494 8.530 7.439 6.098 7.761 0.880 9.552 6.943 8.842 1.139 10.875

% 0.0% 0.1% 0.4% 0.0% 0.7% 0.3% 0.0% 0.7% 0.7% 0.5% 0.2% 0.3% 0.2% -0.3% -0.3%

In 1 m ...3 m 80 84 1.23 1.30 0.79 0.83 1.20 1.20 7.60 7.50 8.80 9.00 7.45 7.45 6.18 5.77 7.72 6.87 0.86 0.83 9.6 9.0 7.15 6.92 5.72 5.82 1.16 1.20 11.14 10.84

...6 m ...12 m 85 85 1.35 1.40 0.85 0.87 1.20 1.30 7.50 7.60 9.00 9.00 7.45 7.45 5.56 5.43 6.54 6.39 0.83 0.84 8.8 8.7 6.67 6.43 5.67 5.46 1.20 1.18 10.59 10.34

FX AUD CAD CHF CZK DKK GBP HKD ISK KWD LTL LVL NZD PLN SGD RUB

USD 1.0391 1.0102 0.9782 20.54 6.0557 1.5663 7.7570 125.77 0.2818 2.8104 0.5671 0.8015 3.3876 1.2570 32.0600

% -0.41% 0.26% 0.01% -0.67% -0.03% -0.40% 0.01% 0.88% -0.04% -0.09% -0.05% -0.35% 0.26% 0.25% 0.69%

EURSEK & OMXS 9.1 8.9 8.7 8.5 11-Jun 29-Jun 550 500 450 400 350 19-Jul

OMXS ra. EURSEK

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

NIBOR Prior 1.92 2.23 2.47 2.62 2.40 2.66 2.91 3.16

SWAP AND MONEYMARKET RATES STIBOR EURIBOR Last Prior Last Prior 1.92 1.87 1.87 0.13 2.22 2.09 2.08 0.34 2.48 2.35 2.34 0.66 2.62 2.45 2.44 0.84 2.37 1.67 1.66 0.76 2.63 1.79 1.79 1.07 2.89 1.96 1.95 1.40 3.15 2.13 2.12 1.76

Last 0.12 0.34 0.64 0.83 0.75 1.06 1.39 1.75

USD LIBOR Prior Last 0.25 0.25 0.46 0.45 0.73 0.73 0.91 0.90 0.54 0.53 0.89 0.86 1.27 1.23 1.69 1.63

Gov. Bonds, 10y 1.75 1.50 1.25 1.00


NOK, ra.

3.00 2.50 2.00 1.50


SEK

NORWAY Prior Last /A No Data 102.70 10y 10y yield 1.71 1.72 vs bund 0.49 0.52

GOVERNMENT BONDS US SWEDEN GERMANY Prior Last Prior Last Prior 120.62 120.79 104.94 105.03 102.17188 1.26 1.25 1.22 1.21 1.51 0.04 0.04 0.29

Last 102.38 1.50 0.29

11-Jun 29-Jun 19-Jul

13.0 12.5

JPY and DowJones

81 79 77

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 2.10 2.50 0.50 2.25 2.50 3.75 2.05 2.75 0.50 2.75 2.85 4.25 2.20 3.00 0.50 3.25

US 3m libor 10y s wap 0.50 2.25 0.50 2.50 0.50 3.00

12.0 11-Jun

29-Jun

75 19-Jul

USDJPY ra. DowJones, 1000

USD and gold 1670 1620 1.28 1.26 1.24 1570 1.22 1520 1.20 11-Jun 29-Jun 19-Jul
EURUSD ra. Gold

MISCELLANEOUS FRA NOK 3m Prior chg TWI Today SEP 2.11 2.11 0.00 NOK 93.70 DEC 1.96 1.97 -0.01 SEK 113.77 MAR 1.95 1.96 -0.01 EUR 97.65 JUN 1.97 1.97 0.00 USD 82.92 FRA SEK 3m Prior chg GBP 84.20 SEP 1.86 1.88 -0.01 Comm. Today DEC 1.62 1.63 0.00 Brent spot 106.7 MAR 1.53 1.51 0.02 Brent 1m 106.0 JUN 1.49 1.49 0.00 Spot gold 0.0 Sources to all tables and graphics: Reuters and DNB Markets

% 0.73 0.27 0.18 0.03 - 0.5 Last 108.6 107.8 1584.0

Stock ex. Today Dow Jones 12,943.4 Nasdaq 2,965.9 FTSE100 5,714.2 Eurostoxx50 2,302.5 Dax 6,758.4 Nikkei225 8,669.9 Oslo 427.13 Stockholm 495.29 Copenhagen 621.98

% 0.3% 0.8% 0.5% 0.8% 1.1% 0.0% 0.6% 1.8% 1.4%

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