MARKET MOVER - BNP PARIBAS - Investment Services India

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This publication is classified as non-objective research Next week's T-Bills Supply Date Country Issues Details 21/09 Japan T-Bills Nov 2012 JPY 2.5tn UK T-Bills Oct 2012 GBP 1bn T-Bills Dec 2012 GBP 0.5bn T-Bills Mar 2013 GBP 1.5bn Canada T-Bill Oct12 (Cash Mgt) (new) CAD 2bn 24/09 France BTFs 21 Sep Germany Bubills Sep 2013 (new) EUR 3bn US T-Bills Dec 2012 USD 32bn T-Bills Mar 2013 (new) USD 28bn FHLMC Bills 3-month & 6-month 24 Sep 25/09 Spain Letras Dec 2012 24 Sep Letras Mar 2013 24 Sep Canada T-Bill Jan 2013 CAD 8.6bn T-Bill Mar 2013 (new) CAD 3.2bn T-Bill Sep 2013 (new) CAD 3.2bn US T-Bills 4-week 24 Sep FHLB Discount Notes 26/09 Italy BOT Mar 2013 21 Sep Sweden T-Bills Dec 2012 SEK 5bn T-Bills Mar 2013 SEK 10bn FNMA Bills 3-month & 6-month 24 Sep 27/09 Japan T-Bills Jan 2013 JPY 5.7tn Denmark T-Bills 25 Sep FHLB Discount Notes 28/09 UK T-Bills 21 Sep Sources: Treasuries, BNP Paribas Next week's Eurozone Redemptions Date Country Details Amount 28/09 Belgium OLO 5% (OLO 38) EUR 7.7bn Total Eurozone Long-term Redemption EUR 7.7bn 26/09 Germany Bubills (12m) EUR 3.0bn 27/09 France BTF EUR 9.4bn 28/09 Italy BOT (6m) EUR 8.5bn 28/09 Neths DTC EUR 6.4bn Total Eurozone Short-term Redemption EUR 27.3bn 20 15 10 5 0 Next week's Eurozone Coupons Country France Italy Belgium Greece Portugal Total Long-term Coupon Payments Chart 1: Investors’ Net Cash Flows (EUR bn, 10y equivalent) Net Investors' Cash Flows (EUR bn , 10y equivalent) Amount EUR 0.3bn EUR 0.4bn EUR 4.4bn EUR 0.0bn EUR 0.5bn EUR 5.6bn -5 -10 Comments and charts • EGBs gross supply is likely to increase further in the week ahead from already elevated levels. We indeed expect EUR 22bn of gross supply, up from EUR 19bn, while only EUR 7.7bn debt will redeem (OLO). In 10y duration-adjusted terms, this would be equivalent to EUR 16bn. • On Monday, Belgium will kick off a busy week with EUR 2-3bn (forecast) issuance in OLOs Jun-17, Sep-19, Sep-21 and Sep-22. On Tuesday, Italy will sell CTZ and BTPeis for forecast amounts of EUR 3bn and EUR 1.5bn respectively. Later on, the Netherlands plan to sell EUR 1.5-2.5bn of DSL Jan-33. On Wednesday, Germany will sell EUR 5bn of Bund Sep-22. And on Thursday, Italy will come back to the market for the sale of 5y and 10y BTPs and possibly CCTeu, for a forecast amount of EUR 6-7bn. • Outside of the eurozone, Norway will sell NOK 2bn of NGB May-19, the US will sell a new 2y, 5y and 7y notes for a total of USD 99bn, and Japan will reopen JGB Oct-14 for JPY 2.7tn. Finally, Canada will raise cash in a 2y format. 18 16 14 -15 -20 20 18 16 14 12 10 8 6 4 2 0 Week of Sep 17th Week of Sep 24th Week of Oct 1st Week of Oct 8th Chart 2: EGB Gross Supply Breakdown by Country (EUR bn, 10y equivalent) Germany Italy Portugal Belgium France Spain Netherlands Austria Finland Greece Ireland Week of Sep 17th Week of Sep 24th Week of Oct 1st Week of Oct 8th Chart 3: EGB Gross Supply Breakdown by Maturity (EUR bn, 10y equivalent) EGBs Gross Supply (EUR bn, 10y equivalent) 2-3-YR 10-YR 5-7-YR >10-YR 12 10 8 6 4 2 0 Week of Sep 17th Week of Sep 24th Week of Oct 1st Week of Oct 8th All Charts Source: BNP Paribas Interest Rate Strategy 20 September 2012 Market Mover 56 www.GlobalMarkets.bnpparibas.com
Central Bank Watch Interest Rate EUROZONE Current Rate (%) Minimum Bid Rate 0.75 US Fed Funds Rate 0 to 0.25 Discount Rate 0.75 JAPAN Call Rate 0 to 0.10 Basic Loan Rate 0.30 UK Bank Rate 0.5 DENMARK Lending Rate 0.20 SWEDEN Repo Rate 1.25 NORWAY Sight Deposit Rate 1.50 SWITZERLAND 3 Mth LIBOR Target Range CANADA 0 to 0.25 Overnight Rate 1.00 Bank Rate 1.25 AUSTRALIA Cash Rate 3.50 CHINA 1Y Bank Lending Rate BRAZIL 6.00 Selic Overnight Rate 7.50 Date of Last Change -25bp (5/7/12) -75bp (16/12/08) +25bp (18/2/10) -10bp (5/10/10) -20bp (19/12/08) -50bp (5/3/09) -25bp (5/7/12) -25bp (6/9/12) -25bp (14/3/12) -50bp (3/8/11) +25bp (8/9/10) +25bp (8/9/10) -25bp (6/5/12) -31bp (5/7/12) -50bp (29/8/12) Next Change in Coming 6 Months -25bp (6/12/12) No Change No Change No Change No Change -25bp (702/13) -15bp (6/12/12) -25bp (18/12/12) No Change No Change No Change No Change -25bp (2/10/2012) -25bp (Q3 2012) No Change Source: BNP Paribas For the full Emerging Market Central Bank Watch, please see our Local Markets Mover. Comments Because of the economic outlook, the door is still open for the ECB to cut policy rates further. We see December as the most likely timing, in tandem with the staff projections, which will include 2014 for the first time. Downward surprises on the economy and/or a return to more turbulent markets could prompt an earlier move. The FOMC announced an aggressive open-ended programme of quantitative easing at its September meeting. We think the Fed will end up expanding its balance sheet by an additional USD 1-1.5trn. It also pushed the forward guidance for the first rate hike into mid- 2015. Under its de facto flexible inflation-targeting regime, the BoJ will probably undertake additional easing (increase in JGB purchases under its asset purchase programme) at a gradual tempo until the goal of 1% inflation is in sight. QE was increased by GBP 75bn in October 2011, GBP 50bn in February 2012 and GBP 50bn in July 2012. We expect another GBP 50bn in QE in November and again in February 2013. We also expect a 25bp cut in the Bank Rate in February. We expect a 15bp cut of the policy rate in December, a smaller cut than the ECB, to keep the policy rate above zero. The Riksbank is likely to deliver one more rate cut this year, in Q4, as economic activity slows and inflation remains low. Domestic economic conditions continue to strengthen. But, due to uncertainty stemming from the eurozone, we do not expect a change in the policy rate this year. The SNB maintains a minimum exchange rate of 1.20 to the euro. We do not expect a shift in the policy stance, but emphasis on rising imbalances in the real estate market is likely to increase in upcoming statements. Inflation has fallen sharply, as wage pressures remain subdued and growth has disappointed. Despite this, the BoC has maintained a hiking bias, as high household debt and risks in the domestic housing market remain key vulnerabilities. We expect the BoC to keep its policy rate on hold until mid-2013. Downside risks emanating from Europe and, increasingly, China, argue for some further modest policy easing later in the year. Although the economy has yet to show signs of recovery, borrowing costs have risen. Hence, another rate cut is still needed near term. We also expect one more RRR cut this year. BCB has cut rates by 500bp since mid-2011. A final 25bp cut in October remains a possibility, but the most likely outcome is that rates are now kept on hold. Change since our last weekly in bold and italics Market Economics 20 September 2012 Market Mover 57 www.GlobalMarkets.bnpparibas.com
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Market Economics | Interest Rate St
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Spain set to present its new budget
Page 5 and 6: The methodology All of the above in
Page 7 and 8: Ireland: What to Expect When You Ar
Page 9 and 10: Spain: Inching Closer to a Request
Page 11 and 12: UK Inflation: No Pressure • UK in
Page 13 and 14: US Housing: New Channels for Policy
Page 15 and 16: Japan: The Eastern Fiscal Cliff •
Page 17 and 18: an agreement that all budget-relate
Page 19 and 20: This section is classified as non-o
Page 33 and 34: Table 1: BNP Paribas' Inflation For
Page 35 and 36: Table 3: BNP Paribas' Inflation For
Page 43 and 44: Economic Calendar: 21 - 28 Sep (con
Page 45 and 46: Key Data Preview Chart 1: UK Cumula
Page 47 and 48: Key Data Preview Chart 5: German He
Page 49 and 50: Key Data Preview Chart 9: German ES
Page 51 and 52: Key Data Preview Chart 13: Japanese
Page 53 and 54: Key Data Preview 7000 6500 6000 550
Page 55: Treasury and SAS Issuance Calendar
Page 61: For Production and Distribution, pl
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