Chapter 2 Financial markets

Executive Board December 2003

150

1,5

140

1,4

130

1,3

120

1,2

110 100 90 80

1 0,9

140 1997

Daily figures

1,1

150

1996

2.1a Exchange rates against USD 1.4

0,8 1998

1999

2000

2001

2002

2003

1.3

130 120

1.5

1.2

JPY per USD (left-hand scale)

1.1

110 100

USD per euro (right-hand scale)

0.9

90 80 2000 Executive Board December 2003

1

0.8 2001

2002

2003 Source: EcoWin

1

130

130

120

120

110

110

100

100

90

90

80

2.1b Nominal effective exchange rates.

A rising value denotes an appreciating exchange rate. 3 January 2000 = 100. Daily figures

80

120

70 1996

70

1997

1998

1999

2000

2001

2002

EUR

2003

110

110

100

100 USD

90

80 2000

2002

15

12

12

9

9

6

6

3

3

9 8

92

2003 Sources: EcoWin, ECB and Norges Bank

15

-3

2.2a Three-month money market rates Nominal interest rates. Daily figures 9

0 -3 93

94

95

90

80 2001

Executive Board December 2003

0

120

96

97

98

99

00

01

02

8

03

7

7

6

NOK

5

5 GBP

4 3

EUR

1

USD

0

Executive Board December 2003

4 3

2

-1 2000

6

JPY

2001

2002

2 1 0 -1

2003 Source: Norges Bank

2

October-December 2003

2.2b Yields on 10-year government bonds. Redemption yield. Daily figures 8

5

5

4

4

3

8

2

7

US

2

7

1

6

3

6

0

1 0

01 06 11 16 21 26 31 05 10 15 20 25 30 05 10

5

5

Germany

4

4

3

3 Japan

2

2 1

1

0

0 2000

2001

2002

2003 Sources: Norges Bank and EcoWin

Executive Board December 2003

2.3 Movements of sub-indices on the Oslo Stock Exchange Daily figures. 2 January 2001 = 100

125

OSEBX

Energy

Industrials

Financials

125 ICT*

100

100

75

75

50

50 * The ICT index is calculated as the average of the IT and telecom indices.

25 2001 Executive Board December 2003

25 2002

2003 Source: EcoWin

3

2.4 Developments on international bourses. Daily figures 2 January 2001 = 100 125

125 Wilshire 5000,USA

FTSE 100,UK

DAX,Tyskland

Topix,Japan

100

100

75

75

50

50

25 2001

25 2002

2003 Source: EcoWin

Executive Board December 2003

2.5 Yield spreads between US corporate bonds and government bonds Daily figures. Percentage points

2.4

11 10

2.2 2

Investment grade (left-hand scale)

9

1.8

8

1.6

7

1.4

6 Speculative grade (right-hand scale)

1.2 1 Jan 02 Executive Board December 2003

5 4

May 02

Sep 02

Jan 03

May 03

Sep 03 Source: EcoWin

4

2.6 Yield spreads between government bonds from emerging economies and US government bonds. Daily figures. Percentage points 25

25

20

20 Brazil

15

15

Turkey

10

10

EMBI+

5

5 Asia

0

0 Jan 02

May 02

Sep 02

Jan 03

May 03

Sep 03 Sources: JP Morgan, EcoWin

Executive Board December 2003

2.7 Norges Bank's sight deposit rate and short-term money market rates. Nominal interest rates. Daily figures 9

9 1-week rate

8

8

7

7

6

10

10

8

Sight deposit rate

6

8

5

5

6

6

4

4

4

4

3-month rate 2 96

3

2 97

98

99

2 2001 Executive Board December 2003

00

01

02

3

03

2 2002

2003 Source: Norges Bank

5

6

6

4

4

2

2

0

0

4

-2 1996

2.8 Interest rate differentials NOK-EUR and NOK – main trading partners. 3-month nominal rates. Daily figures 4

-2 1997

1998

1999

2000

2001

2002

2003

3

3 NOK-EUR

2

2

1

1

0 2001

NOK-Main trading partners

2002

0

2003 Source: Norges Bank

Executive Board December 2003

2.9 Three-month forward rates FRA rates 4

4 16 September

24 October

3.5

3.5

3

10 December

2.5

3

2.5 Sep 03

Executive Board December 2003

Dec 03

Mar 04

Jun 04

Sep 04 Source: Norges Bank

6

2.12 Three-month FRA rates. 1 January 2003 -10 December 2003. Daily figures 6

6

5

5

March 2004 December 2003 June 2004

4

September 2004

3

2 Jan 03

4

3

2 Mar 03

May 03

Jul 03

Sep 03

Nov 03 Source: Norges Bank

Executive Board December 2003

2.11 Norges Bank's sight deposit rate, actual 3-month rates and FRA rates 8

8 3-month rate

7

7 Sight deposit rate

6

6 FRA rates:

5

24 Oct. 03

4

16 Sept. 03

3

5 4 3

10 Dec. 03

2 2000 Executive Board December 2003

2 2001

2002

2003

2004 Source: Norges Bank

7

2.12a Forward rates in Norway Implied short-term forward rates 6

6 23 October 2003

5

5 10 December 2003

4

4

3

3 16 September 2003

2

2

1

1

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

Source: Norges Bank

Executive Board December 2003

2.12b Forward rates in Norway, the US and Germany 10 December 2003 7

7 US

6

6

Germany

5 4

5 Norway

4

3

3

2

2

1

1

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

Executive Board December 2003

Source: Norges Bank

8

2.12c Differential between Norwegian and German forward rates 1,5

1,5

1

1 16 September 2003

0,5

23 October 2003

0,5

10 December 2003

0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

0

Source: Norges Bank

Executive Board December 2003

2.13a Differencial between Norwegian and German 10-year forward rates 1.5

1.5

1.2

1.2

0.9

0.9

0.6

0.6

0.3

0.3

0 2000 Executive Board December 2003

0 2001

2002

2003

Source: Norges Bank

9

2.13b Differential against German forward rates 10 years ahead 1.5

1.5 Norway

1.2

1.2 0.9

0.9 0.6

0.6

US

0.3

0.3

0

0 -0.3 2001

-0.3 2002

2003 Source: Norges Bank

Executive Board December 2003

2.14 Yields on Norwegian government bonds Redemption yield. Daily figures 7

7

6

6 10

10

10-year rate 8

5

6

6

4

5

8

4

4

2 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

3 2001 Executive Board December 2003

5-year rate

4

2

3 2002

2003 Source: Norges Bank

10

2.15 Yield spreads. Government bonds 10-year maturity. Daily figures 2.5

2.5 NOK/USD

2

2

NOK/DEM

1.5

1.5

1

1

0.5

0.5

0

NOK/SEK

-0.5 2001

-0.5 2002

2003 Source: EcoWin

Executive Board December 2003

85

85

Monthly figures

90 95

90 95

100 105

0

2.16 Exchange rates Index. Daily figures

100

84

84

105

110

110

881997

115 1996

88

115 1998

92 96

1999

2000

2001

2002

2003

92

Import-weighted exchange rate, 44 countries (1995=100)

96

100

100

104 108 2001 Executive Board December 2003

Trade-weighted exchange rate (1990=100)

104 108

2002

2003 Source: Norges Bank

11

2.17 Krone exchange rate (TWI) and 3-month interest rate differential against other countries 5 4

90

3-month interest rate differential

TWI

95

3 100 2 105

1 0 2001

110 2002

2003 Source: Norges Bank

Executive Board December 2003

2.18 Nominal effective exchange rates Rising value denotes an appreciating currency 2 January 2001 = 100 120

Norway

Australia

New Zealand

Canada

120

110

110

100

100

90

90

80 2000 Executive Board December 2003

80 2001

2002

2003 Sources: Norges Bank and EcoWin

12

2.19 Implied volatility for NOK/EUR Annualised expected standard deviation. Per cent 11

11

10

10

9

9

9

7

9

7

5

5

3 1999

8

8

3

2000

2001

2002

2003

7

7

6

6

5

5

4 Jan 02

1 mo.

3 mo.

12 mo.

Jan 03

May 03

Sep 03

4 May 02

Sep 02

Source: EcoWin

Executive Board December 2003

2.20 Probability for the effective krone exchange rate Probability per 0.1 one month ahead point

3

24.10.03

2,5

09.12.03

2

NOK/EUR=50% NOK/USD=15% NOK/SEK=22% NOK/GBP=13%

1,5

16.09.03

1 0,5 0 90 Executive Board December 2003

95

100

105

110

115 Source: Norges Bank

13

2.21 Credit indicator (C2) 12-month growth. Per cent 10

10

8

8

16 12

16

6

8 4

8 4

4

0

4

0

-4 -8

6

12

-4

2 90

2

-8 91

92

93

94

0 Jan 02

95

96

97

Apr 02

98

99

00

01

02

03

Jul 02

Oct 02

Jan 03

Apr 03

Jul 03

0 Oct 03

Source: Norges Bank

Executive Board December 2003

Share of loan debt in October 2003

8

2.22 C2 by borrower sector

Households Non-fin. enterp. Municipalities

12-month growth. Per cent

34 58

20

20

15

Non-financial enterprises

Households

15

10

10

5

5 Municipalities

0 1998 Executive Board December 2003

0 1999

2000

2001

2002

2003

Sources: Statistics Norway and Norges Bank

14

2.23 Total credit (C3) (Domestic and foreign sources) 12-month growth. Per cent 10

10 8 18 15

C3 mainland Norway 18

6

9

C3

12

4

4

9

6 3

6

15

12

8

6 3

2

0 1997

2

0 1998

1999

2000

2001

2002

2003

0

0 Jan 02

Apr 02

Jul 02

Oct 02

Jan 03

Apr 03

Jul 03

Oct 03

Source: Norges Bank

Executive Board December 2003

16

16

2.24 Money supply (M2)

12

12

12-month growth. Per cent

8

8

12

4

124

10

0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

10

0

8

8

6

6

4

4

2

2

0 Jan 02 Executive Board December 2003

0 Apr 02

Jul 02

Oct 02

Jan 03

Apr 03

Jul 03

Oct 03

Source: Norges Bank

15