Markets Roundup. US dollar remains key for market direction. 23 March 2015 Research

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1 Markets Roundup 23 March 215 Research CONTENTS Market Movers 2 Economics Weekly Calendar 7 Central Bank Policies 8 Forecast Table 9 Interest Rates (3M 1yr) 1 Gov t Bond Yields (2yr 1yr) 11 Interest Rate & Bond Futures 12 Equities, Currencies & Commodities 13 DATA RELEASES United States 23/3 Existing home sales 24/3 Consumer prices 24/3 New home sales 25/3 Durable goods orders 27/3 GDP Q4 (3 rd estimate) Eurozone 24/3 PMI business surveys 25/3 Ifo index (Ger) 26/3 M3 money supply United Kingdom 24/3 Consumer prices 24/3 Producer prices 26/3 Retail sales RESEARCH Duncan de Vries Erwin Langewis E: nibc.research@nibc.com US dollar remains key for market direction A more dovish tone from the Fed dominated the news last week, but it will probably be Greece that is in the headlines this week (p.2 p.6). The Chart of the Week shows USD credit to non-banks outside the US and the USD index. We discussed the US dollars appreciation regularly the past months. Despite the growing importance of other currencies such as China s renminbi, the USD is still by far the worlds most important currency. The share of currency reserves in the USD held by central banks was about 62.3% in Q3, according to IMF data. And the Bank of International Settlements calculated that off-shore lending in USDs has ballooned, to USD 9.2trn in Q3 of last year from roughly USD 5trn in 27. These figures give an indication about the importance of the USD for the world economy, especially in the context of the recent sharp appreciation of the currency. The year-on-year gain of the USD s trade weighted index has been the strongest since 1985 and the dollar s annual exchange rate appreciation has been almost 25% against the euro. Such a sharp USD appreciation historically coincided or was followed by a crisis (e.g. sterling crisis in 1976, the Latin American crisis in the 198s, tensions that ended in the Plaza Agreement in 1985 and the Emerging Market crisis in 1997/98) or recession since the 197s. These are thus clearly not pleasant times for those who are short the USD. And as underlying aggregate data from the BIS show that developing nations took up the bulk of the increase in USD loans in absolute amounts the past year, this partly explains why a number of Emerging Market countries (e.g. Brazil and Turkey) are under significant pressures at the moment. But the current relative scarcity of USDs as is for example reflected by the significant widening in cross-currency basisswaps (i.e. a premium has to be paid to receive dollars) suggests that it is not sufficient to only focus on EMs. Chart of the Week: USD appreciation spells trouble ahead % change on a year ago % change on a year ago US dollar credit to non-banks outside the US (LS) USD index (inverted axis, RS) Source: BIS, Bloomberg Important disclosures appear on the final page of this document

2 MARKET MOVERS: REVIEW & PREVIEW United States FOMC meetings of the Federal Reserve are usually triggers for general bullishness in the US financial markets as investors are conditioned to the fact that the Federal Reserve tends to help them in creating optimism and won t let them down. Last Wednesday s FOMC meeting was no exception in this regard as it triggered significant rallies in the prices of stocks, bonds and energy. Interestingly, the US dollar plunged intraday almost 4%(!) against the euro from 6 to Especially the swift move from 8 towards 1.14 in a matter of minutes just after the closing at Wall Street that day attracted attention. After all, it does not happen that often that the value of the world s reserve currency jumps up and down like some illiquid asset. Remarkably, the US dollar rebounded on Thursday to 6 against the euro before the EUR/USD rate went down again on Friday closing at 82. This FOMC meeting came after a long period (of about 7 months) that was characterised by a strengthening US dollar against virtually all other currencies on the view that the Fed will start raising rates this year, whereas other central banks are still in easing modus (see also Chart of the Week). Not only is this uptrend in the US dollar and the coinciding downturn in commodity prices a threat for Emerging Market countries, more relevant for US policymakers is the fact that the strong dollar also hurts profitability of US multinational firms. The latter could potentially impede US financial markets as a downturn in company s earnings is historically often followed by a bear-market in stocks. Accordingly, a normalisation of monetary policy after years of unorthodox policies and extremely low interest rates potentially could put in jeopardy the bull-markets that have been created in stocks and bonds over the last 6 years. No modern central banker would want to underwrite bear-markets and therefore, market participants were hoping that the Fed would reconsider its idea about future monetary tightening. Judging from last week s press conference of Fed Chair Janet Yellen and the market reaction to it, the Fed did not disappoint. Although the removal of the word patient from the Fed s press statement theoretically introduces uncertainty regarding the future trend of monetary policy for financial market participants, this uncertainty was effectively removed again by the introduction of various other phrases in the press statement and more importantly by the Fed s own quarterly Economic Projections that accompanied the press statement. First, Yellen said that there won t be a rate hike at the FOMC meeting scheduled for 29 April and that the first rate hike will preferably occur at FOMC meetings that include a press conference, meaning that a rate hike this year may occur in June or September or December. Additionally, the patient wording in the press statement was replaced by a vague forward guidance that indicated that the Fed will only raise rates when it sees the labour market further improving and when it will be confident that inflation will return to 2.% over the medium-term. Judging from this new forward guidance the chance of a rate hike in June seems to have diminished as the Fed s policymakers have become more dovish on the economy compared the previous FOMC meeting. Whereas in the press statement of the FOMC meeting of 28 January the Fed s policymakers indicated that growth was solid they now said that growth has moderated somewhat and highlighted that export growth has weakened (a reference to the impact of the recently strong dollar). This was also the message from the quarterly Economic Projections that accompanied the press statement: projected GDP growth and inflation were lowered a few tenths of a percent for 215 and 216 compared to the Projections issued by late December. Given that inflation is expected to remain low the coming months and incoming economic data have softened recently, we now judge the probability of a first rate hike in June or September as roughly equal. But contemplating a September hike instead of a June rate hike is not what set in motion the plunge in the dollar and what triggered a surge in risk appetite last week. It was the fact that the FOMC officials now anticipate that they will raise policy rates considerably less in the coming years than they anticipated in December. In last week s issue of this report we already said: The Fed s projections (including for policy rates) will attract a lot of attention as it gives a clue about the intended pace of policy tightening going forward. Markets Roundup 2 23 March 215

3 Indeed, more important than the downgraded growth and inflation projections was that the median projection by the Fed s policymakers for the Fed funds rate declined by 5bps from 1.125% to.625% for late 215, while it fell by 6 bps from % to 1.875% for late 216 and by 5 bps from 3.625% to 3.125% by late 217. One may conclude from this assessment that the FOMC now thinks it will hike rates at most only twice this year. This may not only suggest that a large number of FOMC officials would prefer to wait until September before raising rates, it could indicate that many of them are likely to become increasingly hesitant to raise rates if the US dollar continues its advance again sometime in the coming months. The latter seems not unlikely: even though the Fed blinked last Wednesday the fact remains it still has an implicit tightening bias, while a large part of the world is in easing mode. And also the fact remains that certainly after this month s renewed drop in energy prices that headline consumer price inflation is bound to remain close to or below % in the coming months (see chart), thereby presenting dovish monetary policymakers another incentive to hold off rate hikes. As such, the central bankers from the Fed have clearly painted themselves in the corner: as they remained patient over the last months to remove policy accommodation the US dollar strengthened, thereby weakening exports and corporate earnings, energy prices collapsed pressing down inflation, while in the meantime US stock prices attained record highs completely neglecting the prospect of lower corporate earnings. The Fed has clearly fallen far behind the curve over the last 6 months and the message of last Wednesday s FOMC has made matters even worse: financial market participants will now even feel more emboldened to gamble on weak knees of the Yellen-led Fed. Indeed, especially if the US dollar resumes its uptrend and energy prices remain low this year it remains to be seen if the Fed s policymakers are brave enough to sacrifice the stock and bonds markets and the short-term interests of US corporates because the US labour market is doing OK. As such, the dollar remains key in our view. However, we should also not rule out the possibility that the economic weakness seen over recent months and that is conveniently attributed to bad weather by the consensus will be extended into the next quarter. That this is not an entirely unlikely scenario becomes clear when one judges the downward impact of low energy prices on capital spending and the fact that the low energy prices have not translated in stronger car sales, suggesting that the subprime car borrowing binge may be in an extended phase. Both effects seem to contribute to the fact that some indicators point at relatively high inventory levels at firms, which may have to be corrected via an inventory drawdown that will directly affect overall GDP growth negatively. Clearly, if that is going to be the case in the coming quarters the prospect for rate hikes this year would become increasingly diminished. This week s agenda include lots of macroeconomic data from February. Considering the fact that the weather was dismal last month it seems probable that many data will surprise on the downside once again, such as we saw last week with new housing starts which fell sharply. Accordingly, existing home sales and new home sales which are due for Monday and Tuesday respectively may weaken more than expected. Additionally, durable goods orders also seem destined to disappoint the consensus (of a.5% rise) on Wednesday, also caused by US West Coast port disruptions. Consumer prices still in deflation % change on a year ago CPI CPI ex-energy CPI figures of February will be released on Tuesday and are expected to show a continued annual deflation in consumer prices of -.1%. As mentioned, given the renewed weakness in energy prices this month, March CPI figures will also likely continue to paint a deflationary picture. Core CPI (inflation excluding food and energy prices) are expected to have gained by 1.6%/1.7%, driven amongst other by medical prices. Furthermore, a number of Fed officials will be speaking during this week, including Yellen on Friday. Markets Roundup 3 23 March 215

4 Eurozone The shrinkage of the ECB s balance sheet has attracted lots of attention since mid-212. It didn t received this attention because the balance sheet s size was small it is currently still larger than it was before the last four months of but mainly because 1) in contrast to the decline in the size of the ECB s balance sheet other central banks were easing monetary conditions and 2) many people argued that more (and not less) monetary support was needed as the economy was doing poorly and CPI inflation rates falling. Consequently, the euro remained relatively strong and bond yields at relatively elevated levels. End of ECB s balance sheet shrinkage EUR bn Percentage ECB balance sheet (LS) ECB balance sheet/nominal GDP These times are over. The ECB s balance sheet is still getting lots of attention, but this time because of the intended increase in the balance sheet s size. Not only is the ECB intending to purchase EUR 6bn of assets per month, the take-up for the third TLTRO (liquidity injection) was EUR 97.8bn. The contraction of the balance sheet size already ended in the summer of last year and it is expected to rise sharply going forward. The reaction in the markets has been clear: the euro s exchange rate collapsed and bond yields declined in absolute and relative (compared to other countries) terms over recent months. Last week, Ireland was able to issue a 6-month T-Bill at a negative yield for the first time on record, the German yield curve remained negative up to a maturity of 7 years and outside the eurozone government bond yields in Switzerland are even negative up to a maturity of 1 years. Ironically, the balance sheet expansion comes at a moment that economic activity finally seems to have gained some pace the past months and Everyone s betting on a weaker euro x 1, contracts CFTC net euro non-commercial futures positions inflation rates may move north. CPI inflation is expected to have bottomed out in January, while the core CPI inflation rate ticked-up to.7% in February. Draghi summarised the eurozone s situation in a speech last week as follows: We are meeting against the backdrop of a steadily recovering economic situation in the euro area. Most indicators suggest a sustained recovery is taking hold. Confidence among firms and consumers is rising. Growth forecasts have been revised upwards. And bank lending is improving on both the demand and supply sides. Maybe, this extraordinary support will not alone create even bigger bubbles in financial markets, but also support the real economy somewhat more. And this brings us back to the start of the eurozone part of this report. Going long the dollar is a crowded trade and it takes a brave man to go long the euro (against the USD) at the moment. Even last week s message from the Fed that the US central bank s policymakers believe a much slower pace of rate hikes is needed didn t result in a sharp appreciation of the euro against the US dollar at the end of the next day (after the EUR/USD initially aggressively spiked to 1.14). But we learned two things last week. First, the US central bank has difficulties to raise rates. Its policymakers are extremely cautious, which means that any setback increases the probability that there will be no rate hike at all this year. Setbacks could include continuously low inflation rates as a consequence of the appreciation of the dollar and decline in commodity prices or a prolonged economic slowdown after Q1 US GDP growth likely disappoints consensus forecasts (the Bloomberg consensus estimates GDP to expand by 2.4% annualised). As we recently discussed in a special report, a number of leading indicators are already at recessionary levels. If the US central bank Markets Roundup 4 23 March 215

5 indeed retreats from the launchpad, support for the dollar will fall and there is a risk that US interest rates will fall further. End of ECB s balance sheet shrinkage EUR bn Second, the ECB is highly motivated to purchase EUR 6bn of bond securities per month to boost its balance sheet, despite tentative signals for an improvement in economic conditions. This clearly reduces the value of the euro s exchange rate. The markets know as much as we do and it seems therefore logical that a lot of the monetary easing is already priced into the markets even though the chart above shows that balance sheets alone don t tell the whole story. The euro clearly remains under downward pressure at the moment. Moreover, the latest TLTRO take-up was relatively strong. This is a confirmation that the TLTROs might be a cyclical stimulus measure: there is low demand for ECB loans in a weak economic environment and stronger demand in a stronger environment. More downward pressures on the euro should thus be expected in an improving economic environment based on the TLTROs alone unless the ECB starts to scale down the size of the QE programme. Balance sheet expansion era This discussion confirms that central banks not only directly impact financial market asset prices, but that their tentacles are everywhere in financial markets (i.e. liquidity in the markets, FX markets, volatility etc.). More important for this discussion, it emphasises the risks when central banks are not living up to the market s expectations. Percentage Fed balance sheet in USD/ECB balance sheet in EUR (LS) Based on assumptions EUR/USD (RS) In sum, we know what the ECB s actions have done with financial markets. We don t see why the ECB or Fed would surprise the markets by significantly more easing (ECB) or tightening (Fed) at the moment. This is interesting as betting on lower bond yields in the eurozone and a weaker euro have become crowded trades, which increases the risks for a sharp rebound once the current monetary stances reverse. Accordingly, now it s time to make efforts to figure out when the strong trends in exchange rates and interest rates will be broken. It s probably too early to see that happening at present, but risks are building going in the second half of the year in our view (i.e. speculation about ECB QE tapering and maybe even no/even slower rate hikes in the US). This week s agenda includes the PMI business surveys, which we expect remaining close to February s levels. At current levels, the PMIs suggest GDP growth of about.3% on a quarterly basis. Meanwhile, there is still some room for improvement for the German Ifo index, in our view. Furthermore, as there are indications that Greece is running out of cash quickly (maybe already this month according to some sources, while others say it is in mid-april) and political tensions remain high, risks for a Grexit remain too close to call (we stick with our view that the probability of a Grexit is 5%). Risks for capital controls and bank holidays, snap elections and a euro membership referendum remain high, while a default within the eurozone seems to be the preferred option for the Greek government. It s yet another decisive week for Greece indeed. United Kingdom As argued last week: the BoE remains very to use the Fed s (previously used) word patient about raising interest rates. And last week did nothing to change this conclusion. The BoE s cautiousness was maybe best reflected by the comment in the minutes of the early March Monetary Policy Committee (MPC) meeting that all members agreed that it was more likely than not that Bank Rate would increase over the next three years. Meaningless is probably a good word to define this sentence. Nevertheless, it stresses how cautious the BoE is. Even the slightest head wind makes the changes for a rate hike lower. This time it s the low inflation rates and the strengthening of sterling. The word sterling appeared regularly in the minutes as the currency has appreciated against most other Markets Roundup 5 23 March 215

6 currencies the past months, especially against the euro. According to the BoE s MPC, intelligence from market contacts suggested that upward pressure on sterling might have been stronger still had it not been for the effect of uncertainty surrounding the forthcoming general election. As we discussed last week, even though a stronger sterling might support domestic demand, it will hurt activity of the already weak performing export sector. But the BoE seems to be most concerned about the impact on inflation at the moment. In the BoE s own words, Bank staff s central expectation was for CPI inflation to fall to around zero in the February data and remain at around that rate for several months. And while the committee was positively surprised by somewhat stronger average weekly earnings growth in the fourth quarter of last year, last week s labour market report was likely a disappointment for them. To be sure, employment growth remained strong as the claimant count rate (those that are eligible to claim the Job Seeker s Allowance) was equal to where the rate was for only 4 consecutive months in 28. But the disappointment came mainly from pay growth. True, pay growth was not expected to rise until next month, but the decline to 1.8% in January after 2.1% in December was a disappointment indeed. There are, however, two caveats: 1) the decline was mainly caused by less bonus payments and 2) with inflation rates low, real earnings are growing at the fastest rate since 28. Full-time employment is rising fast Million Million Part-time (LS) Full-time (RS) One of the reasons given by the BoE for disappointing pay growth is that the composition of employment growth over the past year had been disproportionately skewed towards individuals with lower educational attainment and in occupations and age cohorts that typically attracted lower pay levels. Longer-time unemployed get a job again % of active population months and more unemployed A rise in part-time jobs might be an indication of such a development. Now the question is how many lower paying jobs can be created in this economy given that employment growth has been that strong. There are numerous indications that labour market conditions have tightened and may be close to the point that will result in a stronger pick-up of pay growth. For example, job vacancies and the number of unfilled vacancies have risen to record high levels. In addition, the chart on the left shows that the number of full-time jobs is rising faster than the number of part-time jobs. Probably more important, the decline in longer-term unemployment might be an indication that labour market conditions have tightened to such an extent that also the group that is missing a year or more of job experience is now able to get a job. This is quite important as a lift-off in wage growth will result in rising speculation about faster rate hikes and, consequently, likely a stronger exchange rate and higher interest rates. We therefore continue to watch these indicators closely, while a pick-up in job pay growth is expected in February. For the shortterm, we see risks for a sharp correction of sterling caused by the elections in May. This week s agenda includes consumer price and retail sales. Retail sales are rising at the strongest pace since late-24 and the improvement in labour market conditions and pick-up in real pay growth suggests that sales will continue to remain strong. The only main negative development is probably slowing housing market activity, but for now we don t think that effect is strong enough to significantly lower retail sales growth. Consumer price inflation is expected to remain low. 12 months and more unemployed Markets Roundup 6 23 March 215

7 ECONOMIC CALENDAR 23 MARCH 27 MARCH, 215 UNITED STATES Date Time Indicator BN Survey Prior Monday 23 March 15: US Existing Home Sales MoM Feb % -4.9% Tuesday 24 March 13:3 US CPI Ex Food and Energy MoM Feb.1%.2% 13:3 US CPI YoY Feb -.1% -.1% 13:3 US CPI Ex Food and Energy YoY Feb 1.6% 1.6% 14:45 US Markit US Manufacturing PMI Mar P : US New Home Sales MoM Feb -1.3% -.2% Wednesday 25 March 13:3 US Durable Goods Orders Feb.5% 2.8% 13:3 US Durables Ex Transportation Feb.5%.3% 13:3 US Cap Goods Orders Nondef Ex Air Feb.3%.6% Thursday 26 March 14:45 US Markit US Composite PMI Mar P :45 US Markit US Services PMI Mar P Friday 27 March 13:3 US GDP Annualized QoQ 4Q T 2.4% 2.2% 13:3 US GDP Price Index 4Q T.1%.1% 13:3 US Core PCE QoQ 4Q T % EUROZONE Date Time Indicator BN Survey Prior Monday 23 March 16: EC Consumer Confidence Mar A Tuesday 24 March 9: FR France Composite PMI Mar P :3 GE Germany Manufacturing PMI Mar P :3 GE Germany Services PMI Mar P :3 GE Germany Composite PMI Mar P : EC Eurozone Manufacturing PMI Mar P : EC Eurozone Services PMI Mar P : EC Eurozone Composite PMI Mar P : BE Business Confidence Mar Wednesday 25 March 8:45 FR Business Confidence Mar : GE IFO Business Climate Mar : GE IFO Current Assessment Mar : GE IFO Expectations Mar : FR Total Jobseekers Feb 349.3k k Thursday 26 March 8: GE GfK Consumer Confidence Apr : EC M3 Money Supply YoY Feb 4.3% 4.1% 1: EC M3 3-month average Feb 4.% 3.6% Friday 27 March 8: GE Import Price Index YoY Feb -3.9% -4.4% UNITED KINGDOM Date Time Indicator BN Survey Prior Monday 23 March 12: UK CBI Trends Total Orders Mar 9 1 Tuesday 24 March 1:3 UK CPI MoM Feb.3% -.9% 1:3 UK CPI YoY Feb.1%.3% 1:3 UK CPI Core YoY Feb 1.3% 1.4% 1:3 UK RPI MoM Feb.4% -.8% 1:3 UK RPI YoY Feb.9% 1.1% 1:3 UK RPI Ex Mort Int.Payments (YoY) Feb % 1.2% 1:3 UK PPI Input NSA YoY Feb -12.8% -14.2% 1:3 UK PPI Output NSA YoY Feb -2.% -1.8% 1:3 UK PPI Output Core NSA YoY Feb.3%.5% Wednesday 25 March 1:3 UK BBA Loans for House Purchase Feb Thursday 26 March 1:3 UK Retail Sales Ex Auto YoY Feb 4.1% 4.8% 1:3 UK Retail Sales Incl. Auto YoY Feb 4.6% 5.4% 12: UK CBI Reported Sales Mar 2 1 Source: Bloomberg News Weekly snapshot of financial market developments in the United States, euro zone and United Kingdom

8 CENTRAL BANK POLICIES United States FOMC Policy interest rate: Federal funds target rate Last action: -75/1 bps on 16 December 28 Next Meetings: 29 April, 17 June, 29 July Policy Outlook: The Fed funds rate has been cut to an unprecedented target range of -.25%. Furthermore, the Fed started to purchase assets and after Operation Twist ended in 212, decided to increase the size of asset purchases per month by a further USD 4bn. The QE3 programme has ended. We expect the first interest rate hike in June 215. FOMC minutes: 29 April, 17 June Eurozone ECB Policy interest rate: Main refinancing rate Last action: -1 bps on 4 September 214 Next Meetings: 15 April, 3 June, 16 July Policy Outlook: The ECB lowered its key policy rates by 1bps in September. The refi rate is at.5% (deposit rate at -.2%) and expected to remain at this level for an extended period. No rate hikes are expected before 217 at least. In addition to liquidity injections (TLTROs), the ECB is purchasing bond securities at a pace of EUR 6bn per month. No additional actions are expected for the shortterm. United Kingdom - Bank of England Policy interest rate: Repo rate Last action: -5 bps on 5 March 29 Next Meetings: 9 April, 11 May Policy Outlook: Inflation rates are falling due to lower energy prices. We expect the BoE to keep rates unchanged at.5% at least till mid-215. Rate hikes are expected by late-215, but risks to our forecast are skewed towards a later start. BOE minutes: 22 April, 2 May, 17 June Markets Roundup 8 23 March 215

9 FORECAST TABLE United States Yearly averages Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 GDP (quarter-on-quarter) (year-on-year) Consumer Price Index (year-on-year) Federal funds rate * yr Treasury yield * Eurozone GDP (quarter-on-quarter) (year-on-year) Consumer Price Inflation (year-on-year) ECB refi rate * Germany GDP (quarter-on-quarter) (year-on-year) Consumer Price Inflation (year-on-year) yr bond yield * Netherlands GDP (quarter-on-quarter) (year-on-year) Consumer Price Inflation (year-on-year) United Kingdom GDP (quarter-on-quarter) (year-on-year) Consumer Price Inflation (year-on-year) BoE bank rate * yr bond yield * *end of period Markets Roundup 9 23 March 215

10 INTEREST RATES (3M 1YR): ACTUALS & CURVE Policy Interest Rates (%) 3m Interest Rates minus Policy Rate (bps) m Interest Rates (%) 12m minus 3m Interest Rates (%) USD Libor Euribor GBP Libor 12m Interest Rates (%) 1 yr Interest Rate Swap Spread (bps) USD Libor Euribor GBP Libor Eurozone United Kingdom Source: Bloomberg Update: 3/23/15 8:4 Markets Roundup 1 23 March 215

11 GOVERNMENT BOND YIELDS (2YR 1YR): ACTUALS & CURVE 2 yr Benchmark govt Bond Yields (%) 1 yr minus 2 yr govt Bond Yields (%) yr Benchmark govt Bond Yields (%) 1 yr Interest Rate Swap Spread (bps) Real govt indexed Bond Yields (%) Estimate of Inflation Expectations (%)* US TIPS 217 (indexed to CPI) FR OATei 217 (indexed to Euro CPI) UK IL Gilts 217 (indexed to RPI) United States (CPI) Eurozone (CPI) United Kingdom (RPI) * Difference between nominal government bond yield and inflation-indexed bond yield ("breakeven inflation") with the same maturity (217) Source: Bloomberg Update: 3/23/15 8:4 Markets Roundup March 215

12 INTEREST RATE & BOND FUTURES: MARKET EXPECTATIONS United States: 3m Eurodollar* United States: 1yr treasury yield* Current JUN 15 SEP 15 DEC 15 MAR 16 JUN Current JUN 15 SEP 15 DEC 15 Euro zone: 3m Euribor Euro zone: 1yr govt Bond Yield Current JUN 15 SEP 15 DEC 15 MAR 16 JUN Current JUN 15 SEP 15 DEC 15 United Kingdom: 3m Sterling United Kingdom: 1yr GILT Yield Current JUN 15 SEP 15 DEC 15 MAR Current MAR 15 JUN 15 Current ** Two weeks ago One month ago * Forward interest rates and bond yields implied by futures contracts. Source: Bloomberg Update: 3/23/15 8:4 Markets Roundup March 215

13 EQUITIES, CURRENCIES AND COMMODITIES Major Equity Markets Major Currencies S&P 5 (LS) FTSE Eurotop3 (LS) FTSE1 (RS) EUR/USD (LS) EUR/GBP (RS) USD/GBP (RS) Commodity Prices Oil Price* /7/212 31/7/ DJAIG Index Spot price (USD) Spot price (EUR) Source: Bloomberg; Update: 3/23/15 8:4 * West Texas Intermediate (WTI) Cushing Crude Oil Spot Price Disclaimer Certain statements in this presentation prepared by NIBC Bank N.V. ( NIBC ) are not historical facts but forward-looking statements. Words such as believe, anticipate, estimate, expect, intend, predict, project, could, may, will, plan and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. These statements are largely based on NIBC s current view with respect to future events and financial trends that we believe may affect the economy, the credit market in general and interest rates. By their very nature, forward-looking statements involve uncertainties and are subject to certain risks, including, but not limited to, the risks and uncertainties as addressed in this presentation, and/or changes in general economic conditions, changes in credit spreads or interest rates. The forward-looking statements speak only as of the date of this presentation. NIBC does not undertake any obligation to update or revise forwardlooking statements contained in this presentation, whether as a result of new information, future events or otherwise. The information and opinions presented here have been obtained or derived from public sources believed by NIBC to be reliable at the date of publication of this presentation. No warranty, prediction or representation is made as to their accuracy or completeness and they are subject to change without notice. NIBC does not make any representation, warranty or prediction that the results anticipated by such forward-looking statements will be achieved, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario. NIBC accepts no liability for (direct, indirect or consequential) loss arising from the use of the information and figures presented. This material is not to be relied upon in substitution for the exercise of independent judgment. When preparing this presentation NIBC has not taken into account any customer s, creditor s or investor s objectives, financial resources or other relevant circumstances and the opinions and recommendations herein are not intended to represent recommendations for particular creditors, customers or investors. NIBC is the owner of all works of authorship including, but not limited to, all design, text, sound recordings, images and trademarks in this presentation unless otherwise explicitly stated. The use of NIBC s material, works or trademarks is forbidden without written consent, except were otherwise expressly stated. Furthermore, it is prohibited to forward or publish material made or gathered by NIBC without its prior written consent. Markets Roundup March 215