MARKET MOVER - BNP PARIBAS - Investment Services India

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Central Bank Watch Interest Rate EUROZONE Current Rate (%) Minimum Bid Rate 1.00 US Fed Funds Rate 0 to 0.25 Discount Rate 0.75 JAPAN Call Rate 0.10 Basic Loan Rate 0.30 UK Bank Rate 0.5 DENMARK Lending Rate 1.05 SWEDEN Repo Rate 0.75 NORWAY Sight Deposit Rate 2.00 SWITZERLAND 3 Mth LIBOR Target Range CANADA 0.0-0.75 Overnight Rate 1.00 Bank Rate 1.25 AUSTRALIA Cash Rate 4.50 CHINA 1Y Bank Lending Rate BRAZIL 5.31% Selic Overnight Rate 10.75 Date of Last Change -25bp (7/5/09) -75bp (16/12/08) +25bp (18/2/10) -20bp (19/12/08) -20bp (19/12/08) -50bp (5/3/09) -10bp (14/1/10) +25bp (2/9/10) +25bp (5/5/09) -25bp (12/3/09) +25bp (8/9/10) +25bp (8/9/10) +25bp (5/5/10) -27bp (22/12/08) +50bp (21/7/10) Next Change in Coming 6 Months No Change No Change No Change No Change No Change No Change No Change +25bp (26/10/10) +25bp (26/01/11) No Change +25bp (20/10/10) +25bp (20/10/10) +25bp (2/11/10) No Change +50bp (26/1/11) Source: BNP Paribas For the full EMK Central Bank Watch please see our Local Markets Mover Comments Doubts about the sustainability of the recovery and low inflation pressures imply no rise in the refinancing rate for a considerable period of time: we expect the first increase only in H2 2012. The FOMC is expected to maintain the funds rate at 0 to 0.25% for an extended period and is likely to initiate a second round of quantitative easing in Q4 2010. We expect the BoJ to maintain its super-low rate policy until 2012, but it may in the meantime further expand its liquidity provision to cooperate with the government in countering deflation and the yen’s appreciation. We expect the MPC to reengage in asset purchases although elevated inflation could delay this until February 2011. We do not expect the BoE to start raising Bank Rate before H1 2012. We expect the central bank to keep its policy rate on hold until H2 2012, in line with our expectation for the ECB. As economic growth remains strong and labour market conditions improve further, we expect the Riksbank to deliver a further hike at its October meeting. Moderate growth since the start of the year and our expectations of a slowdown in growth in Norway’s main trading partners suggest further rate hikes will come gradually. We expect the next hike in Q1 2011. Rates are looking inappropriate given the strength of the domestic economy. But the first hike is being delayed by financial stress in the markets and the exceptional strength of the CHF. Depending on developments in global financial markets and the US economic outlook in particular, we expect the BoC to deliver an additional 25bp of tightening in October. The BoC is then expected to pause at 1.25% to allow further progress in the recovery. The RBA noted in its June statement that policy was appropriate for the “near term”. This appears to rule out any move in the coming months, especially in the context of volatility in global markets. However, likely strong Q2 growth should be enough to prompt a hike late in the year. The benchmark lending rate (12-month) should be left unchanged this year. However, given that housing prices are failing to correct, the government might hike the mortgage loan rate in Q4 10. Accordingly, the deposit rate might also be raised in order to keep the general interest spread unchanged. The BCB has become much more dovish, sounding more comfortable with the balance of risks for inflation on the heels of recent data. However, the monetary authority is likely to resume hiking rates in early 2011 to tame inflation expectations. Change since our last weekly in bold and italics Market Economics 23 September 2010 Market Mover 66 www.GlobalMarkets.bnpparibas.com
Economic Forecasts GDP Year 2010 (% y/y) ’09 ’10 (1) ’11 (1) ’12 (1) ’13 (1) Q1 Q2 Q3 Q4 US -2.6 2.6 1.6 2.6 3.1 2.4 3.0 2.9 2.0 Eurozone -4.0 1.7 1.1 1.4 2.0 0.8 1.9 1.9 2.1 Japan -5.2 3.2 1.6 1.6 1.7 4.7 2.4 3.2 2.6 CPI (% y/y) ’09 ’10 (1) Year ’11 (1) ’12 (1) ’13 (1) Q1 Q2 Q3 Q4 US -0.3 1.7 1.4 0.7 1.1 2.4 1.8 1.3 1.4 Eurozone 0.3 1.6 1.6 1.0 1.2 1.1 1.5 1.7 1.9 Japan -1.4 -0.8 -0.8 0.1 0.6 -1.2 -0.9 -0.9 -0.4 Source: BNP Paribas. End Period, Spot Rates as at 16 September * Preliminary, to be confirmed in the Global Outlook Interest Rate Forecasts Interest Rate (3) (%) Spot Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 US Fed Funds 0.25 0.25 0.25 0.25 0.25 0.25 10-year 2.77 2.00 2.00 2.25 2.50 2.75 Eurozone Refi 1.00 1.00 1.00 1.00 1.00 1.00 10-year 2.48 1.90 1.90 2.00 2.25 2.50 Japan ODR 0.30 0.30 0.30 0.30 0.30 0.30 Call Rate 0.10 0.10 0.10 0.10 0.10 0.10 10-year 1.05 0.90 0.90 1.00 1.10 1.10 Source: BNP Paribas. End Period, Spot Rates as at 16 September * Preliminary, to be confirmed in the Global Outlook Market Economics / Interest Rate Strategy 23 September 2010 Market Mover 67 www.GlobalMarkets.bnpparibas.com
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Euromoney Interest Rates Survey 201
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ECB on a different page… …but i
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developments and is prepared to pro
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and property tax payments, dropped
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directly to effect outright purchas
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Services also on the slide The ‘f
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inflation rate is calculated exclud
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Page 17 and 18: point advance in the June Tankan. P
Page 19 and 20: US: Belly of the Curve is Rich, but
Page 21 and 22: US: A Carry Trade with Extra Potent
Page 23 and 24: MBS: Remain Underweight, GNM CBRs U
Page 25 and 26: EUR: Re-Enter Flatteners on 5y/10y
Page 27 and 28: EGBs: Market Update & Top Trade Ide
Page 29 and 30: EUR Covered Bonds: Market Update
Page 31 and 32: GBP Curve Opportunities Update •
Page 33 and 34: Table 1: BNP Paribas' Inflation For
Page 35 and 36: Table 3: BNP Paribas' Inflation For
Page 37 and 38: Table 1: BNP Paribas Carry Analysis
Page 39 and 40: have been happy to buy the roll to
Page 41 and 42: Technical Analysis - Interest Rates
Page 43 and 44: Trade Reviews Options, Money Market
Page 45 and 46: ond market attracted huge swathes o
Page 47 and 48: warning to Greek banks that it migh
Page 49 and 50: Chart 2: EUR/SEK - major support be
Page 51 and 52: Economic Calendar: 24 Sep - 1 Oct G
Page 53 and 54: Economic Calendar: 24 Sep - 1 Oct (
Page 55 and 56: Key Data Preview Chart 3: US ISM Po
Page 57 and 58: Key Data Preview Chart 7: US Consum
Page 59 and 60: Key Data Preview Chart 11: Japanese
Page 61 and 62: Key Data Preview Chart 7: UK CIPS M
Page 63 and 64: Economic Calendar: 4 - 29 October 4
Page 65: Next week's T-Bills Supply Date Cou
Page 69 and 70: Market Coverage Market Economics Pa
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