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Treasury Daily Market Report - 14 January 2013 Page 1

Headline News

• Japan on holiday; Australia TDMI and

ANZ jobs due; India CPI, WPI

• U.S. budget deficit $0.26 bln in Dec vs

median -$21.0 bln and -$172.1 bln Nov

• NY Fed Ops: purchased $5.562 bln

notes from Oct 2017 - Sep 2018

• Fed hawk Plosser is skeptical of aggressive

monetary policy, which could backfire

• U.S. equities listless amid countervailing

forces; Treasury yields above lows

• Canadas remained defensive despite Q4

drag from trade, CAD made near 3 mth

high

• EUR boosted over $1.33 by bulgebracket

U.S. bank buy call targeting

$1.37

• U.S. trade deficit widened to -$48.7 bln in

Nov vs median -$41.3 bln, -42.1 bln Oct

• U.S. import prices fell 0.1% in Dec, below

median unch; export prices -0.1%

Daily Commentary

Fiscal Woes Swapped for FX Vol Fiscal issues have been swept aside for

a week or two and in their stead the currency market has blown up with

the dollar going opposite directions versus the euro and yen. A heavy

data flow in the U.S., an earnings season that resumes with financial

heavyweights, Beige Book and an update from Fed Chairman Bernanke

will all feature. Also awaited are major monthly updates from China, while

Germany will finalize 2012 GDP.

the Beige Book for January 29, 30 FOMC (Wednesday) will continue to

reflect moderate growth in the economy, consistent with what's been

seen in nearly all those this year, though the tone of recent reports has

been a little more "blue." Although the FOMC minutes indicated there was

discussion about ending QE4, that won't be the case in this commentary.

Hurricane Sandy and the fiscal cliff were noted as factors tempering economic

activity in recent reports, and are likely to be mentioned again in

this report, albeit to a lessening degree. Consumer spending likely grew

at a moderate pace thanks to the holiday season. Manufacturing has

been weak or contracting, and that's probably the case again. Residential

real estate should be decent with small gains noted, though commercial

activity probably lags. Transportation and tourism may have picked up for

the holidays. Hiring gains should have remained modest, with wage and

price pressures subdued.

Yields reversed back down to lows led lower by Bund yields, which doubled

back lower into their close. The Treasury market has been in the

thrall of Europe since the ECB stood pat and unanimously voted for no

change Thursday, which help drive the euro higher as well as yields on

both sides of the Pond. This now appears to be unwound into the weekend

with China and Japan scrambling fighter jets again over their mutual

islands, with flat stocks still providing no useful signals today. The T-note

yield hit a high just under 1.93% amid heavily defensive option bets

earlier and the move on Bunds, but has since collapsed back down to

1.87% again, flattening the curve. The budget deficit is due next, but

shouldn't alter the balance much.

The Philly Fed hawk said that asset purchases were a process of

"gradual incremental easing" and the Fed is likely to halt them before

raising the Fed funds rate. He also prefers the "reaction function" to

policy thresholds for rate policy. He hopes that the threshold levels

will not be changed, since that would be confusing (moving the goal

posts). Yields and stocks are off highs, without much influence from

these expected remarks.

The U.S. trade deficit posted a surprising November widening to

$48.7 bln in November, with the surprise due entirely to a hefty 3.8%

November import surge alongside the expected 1.0% export gain.

The import pop likely reflected both a larger than assumed post-

Sandy bounce and a front-running by importers of the 8-day L.A. port

strike on November 27. The summer drought took a big chunk out of

real food exports, while auto exports and imports bounced in proportion

to the 6.4% November vehicle assembly climb. Market lowered

Q4 GDP growth estimate to 1.0% from 1.5% in response to Thursday’s

surprising trade data, following 3.1% growth in Q3, with an

expected $15 bln Q4 net export subtraction that follows a $12.2 bln

Q3 addition. For the components, market expect a 6% real contraction

rate for Q4 exports that follows a 1.9% Q3 growth rate, while real

imports contract at a 2% rate in Q4 following a 0.6% Q3 rate of decline.

Market expects a widening in the current account deficit to

$118 bln in Q4 from $107.5 bln in Q3.

• Canada's trade deficit widened to -C$2.0

bln in Nov (median -0.5 bln), vs -C$0.55

bln

• EUR added to ECB rally; JPY plunged

after Abe suggested BoJ employment

target

• U.K. Nov production sub-forecasts at -

2.4% y/y, manufacturing unexpectedly

negative

• NYMEX crude eased back sub-$94 bbl

on profit taking after recent gains

Schedule of Forthcoming Key Economic Releases and Events

Monday, 14 th Jan

EU– Industrial Production

JP– Coming of Age Day - Mkts Closed

Tuesday, 15 th Jan

US– Redbook

US– Retail Sales

US– Empire State Index

US– PPI

EU– Trade Balance

GER– CPI

GER– GDP

UK– CPI

UK– Retail Price Index

Wednesday, 16 th Jan

US– MBA Mortgage Applications

US– CPI

US– Beige Bk Jan 29-30 FOMC Meeting

EU– CPI

JP– Consumer Confidence Index

Thursday, 17 th Jan

US– Philadelphia Fed Index

US– Initial Claims

US– Bloomberg Consumer Comfort Indx

US– Continuing Jobless Claims

AU– Unemployment Rate

Friday, 18 th Jan

US– Michigan Sentiment Prelim

US– Industrial Production

This document has been prepared and issued by Ahli United Bank B.S.C. (“AUB”) which is regulated by the Central Bank of Bahrain. All recipients of this document should note that it is being furnished to them solely for information purposes and may not be

reproduced or redistributed to any other person without the permission of AUB. Although information has been obtained from and is based upon sources believed to be reliable, AUB does not warrant its accuracy and it may be incomplete or condensed. All

opinions and estimates constitute AUB’s judgement at the date of publication and are subject to change without notice. AUB does not advise as to the suitability or otherwise of this information and provides the information to recipients exclusively on the

basis that they have sufficient knowledge, experience and/or professional financial, legal, tax and other advice to make an independent assessment thereof.


Treasury Daily Market Report - 14 January 2013 Page 2

Foreign Exchange Snapshot

CCY Today Previous Change % Change 2012 High 2012 Low

USD TW Index 79.56 80.65 -1.09 -1.35% 83.964 78.122

EUR/USD 1.3342 1.3046 0.0296 2.27% 1.3365 1.2998

GBP/USD 1.6135 1.6012 0.0123 0.77% 1.6380 1.6012

USD/JPY 89.19 88.15 1.0400 1.18% 89.19 86.19

USD/CHF 0.9138 0.9265 -0.0127 -1.37% 0.9948 0.9080

EUR/GBP 0.8274 0.81465 0.0127 1.56% 0.8274 0.8086

AUD/USD 1.0533 1.0551 -0.0018 -0.17% 1.0598 1.0377

USD/CAD 0.9844 0.9871 -0.0027 -0.27% 0.9944 0.9815

USD/INR 54.89 54.695 0.20 0.36% 55.37 54.18

USD/IQD 1165.00 1165.00 0.00 0.00% 1168.30 1165.00

USD/SAR 3.7502 3.7502 0.0000 0.00% 3.75050 3.7501

USD/BHD 0.37702 0.37703 -0.00001 0.00% 0.37715 0.37700

USD/KWD 0.28230 0.28240 -0.00010 -0.04% 0.28361 0.27680

USD/QAR 3.6412 3.6405 0.0006 0.02% 3.6416 3.6400

USD/OMR 0.38500 0.38500 0.00000 0.00% 0.38605 0.38400

USD/AED 3.6730 3.6728 0.0002 0.01% 3.6731 3.6728

USD/EGP 6.5424 6.4819 0.06050 0.93% 6.54240 6.17500

USD/LYD 1.2535 1.2596 -0.0061 -0.48% 1.2728 1.2150

Equity Market Snapshot

Inde x

Last

Close

Prev.

Close

D a ily

Chg

% D a ily

Chg

2012

% Chg

2012

High

Dow Jones 13,488 13,488 0.00 0.00% 2.93% 13,610 12,101

NA SDA Q 3,126 3,126 0.00 0.00% 19.98% 3,184 2,545

FTSE 6,122 6,122 0.00 0.00% 3.76% 6,122 5,260

Nikkei 10,802 10,802 0.00 0.00% 3.91% 10,802 8,263

S&P 1,472 1,472 0.00 0.00% 3.22% 1,472 1,277

Kuw ait SE 6,109 6,068 41.51 0.68% -12.17% 6,492 5,933

Dubai SE 1,733 1756 -23.12 -1.32% 6.29% 1,756 1,301

Saudi SE 7,115 7,166 -50.57 -0.71% 6.90% 7,931 6,370

Qatar SE 8,685 8,782 -96.98 -1.10% -2.12% 8,880 8,123

Bahrain SE 1,072 1,062 10.42 0.98% -25.13% 1,162 1,035

Muscat SE 5,844 5,819 25.51 0.44% -14.13% 6,008 5,358

Egy pt Hermes 571 574 -3.06 -0.53% -13.37% 601 382

AUB Group Equity

Official Interest Rates

AUB Stock - Bahrain (US$) 0.600 0.575 0.025 4.35% -15.49% 0.695 0.520

AUB Stock - Kuw ait (Kw D) 0.174 0.164 0.010 6.10% -13.00% 0.192 0.150

AUB Stock - Kuw ait (US$ Eqv) 0.618 0.581 0.037 6.33% -13.36% 0.682 0.531

A LMUTA HED Stock - (Kw D) 0.850 0.850 0.000 0.00% 28.79% 0.930 0.810

ABQ Stock - (QAR) 54.90 56.00 -1.100 -1.96% -12.72% 72.80 48.30

Commercial Bank of Iraq (IQD) 1.27 1.27 0.000 0.00% -8.63% 1.28 1.16

Ahli Bank Oman Stock - (OMR) 0.180 0.180 0.000 0.00% -38.36% 0.265 0.136

KMEFIC Stock (Kw D) 0.039 0.039 0.000 0.00% -55.17% 0.102 0.033

US Discount Rate 0.75% 18-Feb-10 Fed Funds 0.25% 16-Dec-08

ECB Lending Rate 1.50% 08-Dec-11 ECB Repo 0.75% 08-Dec-11

BOE Lending Rate 0.50% 05-Mar-09 UK Base Rate 0.50% 05-Mar-09

Bahrain Repo 2.25% 15-Sep-09 Deposit Facility 0.25% 18-Dec-08

Qatar Repo 4.50% 10-Aug-11 Deposit Facility 0.75% 05-Apr-11

Kuw ait Discount Rate 2.00% 04-Oct-12 Kuw ait 1M Repo 2.00% 08-Feb-10

Saudi Repo 2.00% 19-Jan-09 Reverse Repo 0.25% 16-Jun-09

Corridor Rate 10.25% 24-Nov-11 Egypt O/N Dep 9.25% 24-Nov-11

FOMC Meetings 2012/13

12-Sep-12 unchanged

24-Oct-12 unchanged

12-Dec-12 unchanged

31-Jan-13 ?

21-Mar-13 ?

09-May-13 ?

28-Jun-13 ?

31-Jul-13 ?

Money Market Rates

ECB Meetings 2012/13

19-Jul-12 unchanged

02-Aug-12 unchanged

06-Sep-12 unchanged

04-Oct-12 unchanged

08-Nov-12 unchanged

06-Dec-12 unchanged

10-Jan-13 ?

07-Feb-13 ?

This document has been prepared and issued by Ahli United Bank B.S.C. (“AUB”) which is regulated by the Central Bank of Bahrain. All recipients of this document should note that it is being furnished to them solely for information

purposes and may not be reproduced or redistributed to any other person without the permission of AUB. Although information has been obtained from and is based upon sources believed to be reliable, AUB does not warrant

its accuracy and it may be incomplete or condensed. All opinions and estimates constitute AUB’s judgement at the date of publication and are subject to change without notice. AUB does not advise as to the suitability or otherwise

of this information and provides the information to recipients exclusively on the basis that they have sufficient knowledge, experience and/or professional financial, legal, tax and other advice to make an independ-

2012

Low

Libor Today Previous Change 2012 High 2012 Low

USD 3Mth 0.30400 0.30500 -0.00100 0.58250 0.30400

USD 6Mth 0.49600 0.50000 -0.00400 0.81200 0.49600

USD 12Mth 0.82100 0.83400 -0.01300 1.13035 0.82100

EUR 3Mth 0.19500 0.19200 0.00300 1.28357 0.18100

EUR 6Mth 0.33100 0.32600 0.00500 1.55571 0.31600

EUR 12Mth 0.55900 0.55100 0.00800 1.90457 0.53900

GBP 3Mth 0.51250 0.51250 0.00000 1.08956 0.51250

GBP 6Mth 0.66375 0.66438 -0.00063 1.39563 0.66375

GBP 12Mth 1.00313 1.00438 -0.00125 1.89675 1.00313

AUB Bhibor 3Mth 1.26000 1.26000 0.00000 1.41000 1.25000

AUB Bhibor 6Mth 1.76000 1.76000 0.00000 1.76000 1.60000

AUB Bhibor 12Mth 1.94000 1.94000 0.00000 2.30000 1.92000

SAR 3Mth 0.99625 0.99625 0.00000 0.99625 0.82625

SAR 6Mth 1.01750 1.01750 0.00000 1.01875 0.85125

SAR 12Mth 1.12750 1.12725 0.00025 1.30588 1.04000


Capital & Bond Market Snapshot

Swaps Today Previous Change

Futures Calendar Spreads

3 M th USD GBP EUR

Mar-13 Jun-13 0.02% 0.02% 0.03%

Jun-13 Sep-13 0.02% 0.03% 0.04%

Sep-13 Dec-13 0.03% 0.03% 0.05%

Dec-13 Mar-14 0.04% 0.04% 0.04%

Mar-14 Jun-14 0.06% 0.06% 0.06%

Jun-14 Sep-14 0.06% 0.06% 0.07%

Treasury Daily Market Report - 14 January 2013 Page 3

52 Week

High

52 Week

low

Benchmark

Govt Yields

USD 2Yr 0.41 0.39 0.02 0.68 0.35 0.25

USD 3Yr 0.52 0.51 0.02 0.89 0.42 0.38

USD 5Yr 0.91 0.91 0.00 1.46 0.72 0.78

USD 10Yr 1.93 1.91 0.02 2.46 1.52 1.87

USD 30Yr 2.84 2.87 -0.03 3.17 2.22 3.05

EUR 2Yr 0.52 0.42 0.09 1.24 0.29 0.12

EUR 3Yr 0.64 0.53 0.11 1.39 0.40 0.22

EUR 5Yr 0.98 0.87 0.12 1.78 0.73 0.63

EUR 10Yr 1.81 1.69 0.11 2.47 1.55 1.58

GBP 2Yr 0.77 0.74 0.02 1.42 0.64 0.38

GBP 3Yr 0.87 0.84 0.03 1.47 0.69 0.48

GBP 5Yr 1.21 1.17 0.04 1.78 0.94 1.01

GBP 10Yr 2.12 2.07 0.05 2.67 1.79 2.08

SAR 2Yr 1.04 1.07 -0.03 1.11 0.85 N/A

SAR 3Yr 1.18 1.17 0.01 1.34 0.92 N/A

SAR 5Yr 1.69 1.66 0.03 2.12 1.40 N/A

Swap

Spreads

Change

52 Week

High

52 Week

Low

Govt

Spreads

US 2Yr / 5Yr 0.50 0.51 -0.01 1.57 0.34 0.34

US 2Yr / 10Yr 1.52 1.51 0.00 2.81 0.25 1.62

US 10yr / 30yr 0.92 0.96 -0.05 0.99 0.46 1.18

US / EUR 10yr 0.12 0.21 -0.09 0.32 0.07 0.27

Commodities

Interest Rate Futures

USD Implied GBP Implied EUR Implied

3m Libor 0.30% 0.51% 0.20%

Mar-13 99.710 0.29% 99.470 0.53% 99.755 0.25%

Jun-13 99.695 0.30% 99.450 0.55% 99.720 0.28%

Sep-13 99.675 0.33% 99.420 0.58% 99.680 0.32%

Dec-13 99.640 0.36% 99.390 0.61% 99.630 0.37%

Mar-14 99.600 0.40% 99.350 0.65% 99.585 0.41%

Jun-14 99.545 0.45% 99.290 0.71% 99.525 0.47%

Sep-14 99.485 0.52% 99.230 0.77% 99.455 0.55%

Dec-14 99.410 0.59% 99.160 0.84% 99.380 0.62%

Mar-15 99.330 0.67% 99.100 0.90% 99.315 0.69%

Jun-15 99.240 0.76% 99.020 0.98% 99.235 0.77%

Sep-15 99.140 0.86% 98.930 1.07% 99.145 0.86%

Dec-15 99.020 0.98% 98.820 1.18% 99.040 0.96%

6 M th USD GBP EUR

Mar-13 Sep-13 0.04% 0.05% 0.07%

Jun-13 Dec-13 0.06% 0.06% 0.09%

Sep-13 Mar-14 0.07% 0.07% 0.09%

Dec-13 Jun-14 0.09% 0.10% 0.10%

Mar-14 Sep-14 0.12% 0.12% 0.13%

12 M th USD GBP EUR

Mar-13 Mar-14 0.11% 0.12% 0.17%

Jun-13 Jun-14 0.15% 0.16% 0.19%

Sep-13 Sep-14 0.19% 0.19% 0.23%

Commodity Change % Change 2012 High 2012 Low

RJ CRB Index 296.66 293.97 2.6831 0.91% 325.91 267.97

WTC 93.58 93.06 0.5200 0.56% 109.38 78.73

Gold ($) 1661.55 1656.54 5.0100 0.30% 1789.49 1535.80

Silver ($) 30.51 30.39 0.1200 0.39% 37.19 26.92

Platinum ($) 1552 1552 0.2500 0.02% 1552 1389

Implied 6m Libor (from Futures)

USD GBP EUR

6m Libor 0.50% 0.66% 0.33%

Mar-13 0.30% 0.54% 0.26%

Jun-13 0.32% 0.57% 0.30%

Sep-13 0.34% 0.60% 0.35%

Dec-13 0.38% 0.63% 0.39%

Mar-14 0.43% 0.68% 0.45%

Jun-14 0.49% 0.74% 0.51%

Sep-14 0.55% 0.81% 0.58%

Dec-14 0.63% 0.87% 0.65%

Mar-15 0.72% 0.94% 0.73%

Jun-15 0.81% 1.03% 0.81%

Sep-15 0.92% 1.13% 0.91%

Futures Currency Spreads

GBP/USD EUR/USD GBP/EUR

3m Libor 0.21% -0.11% 0.32%

Mar-13 0.24% -0.04% 0.28%

Jun-13 0.25% -0.02% 0.27%

Sep-13 0.25% -0.01% 0.26%

Dec-13 0.25% 0.01% 0.24%

Mar-14 0.25% 0.02% 0.23%

Jun-14 0.25% 0.02% 0.23%

Sep-14 0.25% 0.03% 0.22%

This document has been prepared and issued by Ahli United Bank B.S.C. (“AUB”) which is regulated by the Central Bank of Bahrain. All recipients of this document should note that it is being furnished to them solely for information

purposes and may not be reproduced or redistributed to any other person without the permission of AUB. Although information has been obtained from and is based upon sources believed to be reliable, AUB does not warrant its accuracy

and it may be incomplete or condensed. All opinions and estimates constitute AUB’s judgement at the date of publication and are subject to change without notice. AUB does not advise as to the suitability or otherwise of this information

and provides the information to recipients exclusively on the basis that they have sufficient knowledge, experience and/or professional financial, legal, tax and other advice to make an independent assessment thereof.


Treasury Daily Market Report - 14 January 2013 Page 4

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This document has been prepared and issued by Ahli United Bank B.S.C. (“AUB”) which is regulated by the Central Bank of Bahrain. All recipients of this document should note that it is being furnished to them solely for information

purposes and may not be reproduced or redistributed to any other person without the permission of AUB. Although information has been obtained from and is based upon sources believed to be reliable, AUB does not warrant its accuracy

and it may be incomplete or condensed. All opinions and estimates constitute AUB’s judgement at the date of publication and are subject to change without notice. AUB does not advise as to the suitability or otherwise of this information

and provides the information to recipients exclusively on the basis that they have sufficient knowledge, experience and/or professional financial, legal, tax and other advice to make an independent assessment thereof.

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