Global Markets Chart Book (Jun 12)

7/31/2019 Global Markets Chart Book (Jun 12)

1/12

Global Markets Chart Book 1

GLOBAL MARKETS

CHART BOOK1stJun.

2012

High-grade bond yields plunge to record lows

The 10-year US Treasury yield fell by more than 35bp in May, hitting arecord low of less than 1.6% as investors sought refuge in high-grade

government bonds. The main trigger for the rally was a renewed flare up in

the euro-zone crisis after the first round of Greeces general election

produced no clear winner. This raised the prospect of the countrys early exit

from EMU and ignited fears about the risks of currency redenomination in

the euro-zone more generally. Concerns grew about the prospects for larger,

troubled countries in the region with fragile banking sectors at risk of

depositor flight, especially Spain. 10-year government bond yields in

Germany and the UK dropped even more sharply than in the US.

Money markets saw a suggestion from the latest US FOMC meeting that athird round of quantitative easing is not completely off the agenda. (Page 2.)

Government bonds in the 10-year sector in the US, Germany and the UK allplummeted to record lows. (Page 3.)

Swap spreads increased in the US as implied volatility in the stock marketpicked up and the yield curve flattened further. (Page 4.)

Credit marketssaw spreads for US BBB-rated bonds in the 7-10 year sectorincrease substantially, but yields barely rose. (Page5.)

Equitiesperformed poorly in Japan in particular as the yen remained strong.(Page 6.)

Emerging markets came under more pressure as investors appetite for riskwaned. The EMBI+ bond spread over Treasuries rose above 4% for the first

time this year. (Page 7.)

Currencymarkets saw the dollar gain ground against sterling and the euro inparticular, but not against the yen. (Page 8.)

Volatilityin the US dollar/euro exchange rate increased. (Page 9.) Correlation between US government bonds and yen/dollar turned

significantly more positive. (Page 10.)

Asset returns. The price of oil fell sharply again.(Page 11.)

Our forecasts have been updated and are detailed at the end of thispublication. (Page 12.)

John Higgins

Senior Markets Economist

Direct Line: +44 (0)20 7811 3912

Switchboard: +44 (0)20 7823 5000

Fax: +44 (0)20 7823 [email protected]


2/12


Money MarketsThe Fed continued its Operation Twist in May (1). The minutes of Mays FOMC meeting suggested that one or

two more voting members were open to the idea of additional monetary easing, at least if the US recovery faded.

One key message from the ECBs press conference was that it was not obviously prepared to sanction additionalsupport measures for the euro-zone economy, despite signs of weakness in the business survey data. However, the

tone of the minutes of the MPCs meeting in May suggested that the door to more quantitative easing in the UK is

still open. Elsewhere, the Bank of Japan announced no further increase in the size of its Asset Purchase Program in

May. Overall, investors remained confident that interest rates will still be very low in a couple of years time (2).

The ECBs LTRO operations have reduced tensions in the interbank market (3) and lowered the cost of dollarfunding (4), but investors remain concerned by the build-up of imbalances in the TARGET2 settlement system thatreflects the reticence of banks in strong economies to lend directly to those in weaker economies. The linkages

between the health of countries banking systems and their sovereign borrowing costs remain very strong (5 & 6).

1. US Federal Reserve Banks US Treasuries Held OutrightBy Remaining Time To Maturity ($bn)

2. Expected Overnight Interest Rates In 2 Years Time (%)(Derived From Overnight Indexed Swap Markets)

3. 3m Libor-OIS Spreads* (bp) 4. 3-Month Currency Basis SwapEuros vs. US Dollars (bp)

5. Selected Current Euro-zone Sov. 10-year Govt. Bond Yields& Est. Eurosystem TARGET2 Balances At End-March (%)

6. 5-Year Credit Default Swaps (Euro-zone) (bp)

Sources Thomson Datastream, Bloomberg, Capital Economics

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12

>10yr

5yr10yr

1yr>


3/12


Government Bonds

The 10-year US Treasury yield fell by more than 35bp in May, hitting a record low of less than 1.6% (1). Thetrigger for the rally was a renewed flare up in the euro-zone crisis after the first round of Greeces general election

produced no clear winner. Concerns also grew about the prospects for larger, troubled countries in the region

with fragile banking sectors at risk of depositor flight, especially Spain. The expectation of continued ultra-loose

monetary policy provided support to Treasuries (2), with the Fed hinting that more quantitative easing was not

completely off the agenda. The drop in the 10-year nominal Treasury yield was driven both by a decline in the

real yield and in the breakeven rate of inflation (3).

The 10-year Bund yield dropped even more sharply to a record low of around 1.2%. Although the 5-yearsovereign credit default swap premium in Germany has risen since the end of March, the country has benefitedfrom its perceived status as a sounder credit than most of its regional peers (4). Reflecting growing fears that Spain

and Italy are now being sucked deeper into the crisis, the yield spread of 10-year government bonds in these

countries over Bunds rose (5). Finally, the 10-year nominal JGB yield dropped to around 0.8% (6).

1. 10-Year Government Bond Nominal Yields (%) 2. US 10-Year Treasury Yield, US 10-Year OIS Rate& US Implied Overnight Rate In 2 Years Time (%)

3. Decomposition Of 10-Year US Treasury Yield (%) 4. Selected Euro-zone Sov. 5-Year CDS Premiums & 10-yearGovernment Bond Yields, Change Since End Mar-2012 (bp)

5. Selected Euro-zone 10-Year Government Bond SpreadsOver 10-Year German Bunds (bp)

6. 10-Year Government Bond Nominal Yields (%)


1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

USGermanyUK

0.0

1.0

2.0

3.0

4.0

5.0

0.0

1.0

2.0

3.0

4.0

5.0


10yr US Treasury Yield10yr US Overnight Indexed Swap RateUS Implied Overnight Rate, In 2 Years' Time*

*3-day moving average

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0


Nominal YieldReal yield - TIPSBreak-even Inflation Rate

-75

-50

-25

0

25

50

75

100

125

150

-75

-50

-25

0

25

50

75

100

125

1505-Year Sovereign CDS Premium

10-year government bond yield

0

250

500

750

1,000

1,250

1,500

0

250

500

750

1,000

1,250

1,500


Italy

Spain

Portugal

*3 day moving averages

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.5

2.0

2.5

3.0

3.5

4.0

4.5


US (LHS)

Japan (RHS)


4/12


Swap Spreads

The spread of US dollar interest rate swaps over US Treasuries of an equivalent maturity rose further in May inboth the 10-year (1) and, to a greater extent, the 2-year sectors (2).

A pick-up in implied volatility in the US stock market may have been one factor behind the increase in the 10-year swap spread (3).

An additional flattening of the US yield curve may have also played a role (4). A flatter curve provides corporateborrowers with less incentive to refinance long-dated debt with shorter-dated debt. This usually tends to result in a

decrease in long-dated fixed rate receiving in the swap market.

Meanwhile, the poor state of the US public finances probably continued to provide an explanation for therelatively low level of the swap spread by historical standards (5).

Finally, the US 5-year CDS/asset swap basis increased significantly further in May (6).

1. 10-Year US Treasury Swap Spread (bp) 2. 2-Year US Treasury Swap Spread (bp)

3. 10-Year US Treasury Swap Spread & VIX 4. 10-Year US Treasury Swap Spread & US Treasury YieldCurve Slope

5. 10-Year US Treasury Swap Spread & US Budget Balance 6. US 5-Year Credit Default Swap Premium & US 5-Year SwapSpread (bp)


-10

-5

0

5

10

15

20

25

30

-10

-5

0

5

10

15

20

25

30


10

20

30

40

50

60

0

10

20

30

40

50

60


0

10

20

30

40

50

60

70

-20

0

20

40

60

80

100

120

140

160

1990 1993 1996 1999 2002 2005 2008 2011

10-Year US Treasury Swap Spread, (bp, LHS)

VIX, % (RHS)

-300

-250

-200

-150

-100

-50

0

50

100

150

-20

0

20

40

60

80

100

120

140

160

1990 1993 1996 1999 2002 2005 2008 2011

10-Year US Treasury Swap Spread (bp, LHS)

2 minus 10-Year US Treasury Yield (bp, RHS)

-12

-10

-8

-6

-4

-2

0

2

4

-20

0

20

40

60

80

100

120

140

160

1990 1993 1996 1999 2002 2005 2008 2011

10-Year US Treasury Swap Spread, (bp, LHS)

US Budget Balance*, (% of GDP, RHS)

*12m rolling inc. CE interpolations

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70


CDS Premium

Swap Spread


5/12


Credit Markets 7-10 year corporate bond spreads in the West increased further in May as the euro-zone crisis flared up (1). For

BBB-rated US corporate borrowers, spreads rose by about 35bp, to nearly 3% (2).Assuming a 40% recovery rate,

the estimated implied probability of default within the next five years was around 22% at the end of the month (3).

Although credit spreads tend to fluctuate with the economic cycle (4), we do not expect the US economic recoveryto be especially strong. Accordingly, we do not expect spreads to contract much from here, especially while the

euro-zone crisis continues to brew.

That being said, US corporate bonds should continue to benefit from ultra-loose monetary policy via its favourableimpact on Treasuries. Corporate bond yields are therefore unlikely to rise by much indeed, they barely rose in the

BBB-rated, 7-10 year sector in May. They could even grind lower as they did during much of the 1940s (5). Firmsalso appear to be in a fairly healthy financial state. The liquid assets held by US non-financial companies at the end

of last year were at their highest level as a share of short-term liabilities in more than half a century (6).

1. 7-10 Year Average Corporate Bond Spread (bp) 2. US 7-10 Year, BBB-Rated Corporate Bond Spread (bp)

3. US 7-10 Year BBB-Rated Corporate Bond Spread& Implied Probability Of Default

4. US Industrial Production & Corporate Bond Spread

5. US 10-Year Treasury Yield & Moodys Seasoned BaaCorporate Bond Yield (%)

6. Liquid Assets Of US Non-Farm, Non-FinancialCompanies

Sources Thomson Datastream, Federal Reserve, Capital Economics

0

100

200

300

400

500

600

0

100

200

300

400

500

600


US

Euro-zone

UK

Japan

0

100

200

300

400

500

600

700

800

0

100

200

300

400

500

600

700

800

2000 2002 2004 2006 2008 2010 2012

Dotted line is average since 2000

0

10

20

30

40

50

60

0

100

200

300

400

500

600

700

800

2000 2002 2004 2006 2008 2010 2012

BBB-Rated 7-10 Year US CorporateBond Spread vs. Treasuries (bp) (LHS)

Implied Probability* Of DefaultWithin 5 Years (%) (RHS)

*40% assumed recovery rate

-20

-15

-10

-5

0

5

10

15

200

100

200

300

400

500

600

700

1960 1970 1980 1990 2000 2010

US Baa Corporate Bond Spread (bp) (LHS)

US Industrial Production (%, y/y) (Inv.) (RHS)

0

2

4

6

8

10

12

0

2

4

6

8

10

12

1925/2002 1930/2007 1935/2012 1940/2017 1945/2022 1950/2027

Corp. Bond Yield (1925-1950)

Corp. Bond Yield (2002-)

Treasury Yield (2002-)

Treasury Yield (1925-1950)

Jun-1932

Apr-1938

10

20

30

40

50

60

70

2

3

4

5

6

7

8

9

10

1952 1962 1972 1982 1992 2002 2012

As A Percentage Of Total Assets (LHS)

As A Percentage Of Short-Term Liabilities (RHS)


6/12


EquitiesStock markets fell sharply in May as investors appetite for risk cooled. The S&P 500 fell about 6%, but this decline

was trumped by both the German DAX (-7%) and the UK FTSE 100 (-7%). However, Japans Topix recorded the

worst performance down nearly 11% (1).

Japanese equities were once again undermined by the persistent strength in the yen (2). Meanwhile, the relativeperformance of euro-zone and US equities continued to be closely tied to movements in the dollar/euro exchange

rate (3).

Euro-zone equity markets appeared to remain attractively valued from a historical perspective (4), unlike USequities (5). At the end of May, the 10-year cyclically-adjusted price/earnings ratio for the non-financial sector was

nearly ten points lower in the euro-zone as a whole than in the US the biggest gap in a decade (6).

1. Equity Indices (Rebased, 1st Jan 2010=100) 2. Japan vs. US Non-Financial Equity Markets &Yen/Dollar

3. Euro-zone vs. US Non-Financial Equity Markets &Dollars/Euro

4. Cyclically-Adjusted Price/Earnings Ratios(Selected Euro-zone Countries)

5. 10-Year Cyclically-Adjusted Real P/E Ratio (S&P 500)& Tobins Equity Q (US Non-Financial Corporate Sector)

6.Cyclically-Adjusted Price/Earnings RatiosUS vs. Euro-zone (Non-Financial Sector)

Sources Thomson Datastream, Bloomberg, Wright, Shiller, CE

70

80

90

100

110

120

130

140

150

70

80

90

100

110

120

130

140

150


US (S&P 500)

Euro-zone (German DAX)

UK (FTSE 100)

Japan (Topix)

60

70

80

90

100

110

120

70

75

80

85

90

95

100


Yen/Dollar (LHS)

Ratio of Japanese to US Non-FinancialEquity Markets (Jan-08=100) (RHS)

50

60

70

80

90

100

110

1.10

1.20

1.30

1.40

1.50

1.60

1.70


Dollars/Euro (LHS)

Ratio of Euro-zone to US Non-FinancialEquity Markets (Jan-08=100) (RHS)

0

2

4

6

8

10

12

14

16

18

0

2

4

6

8

10

12

14

16

18Non-Financial Sector

Financial Sector

Total Market

0

10

20

30

40

50

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

1900 1920 1940 1960 1980 2000

Tobin's Equity Q For The Non-Farm, Non-Financial Corporate Sector (LHS)

S&P 500 Price/10-Year Average EarningsRatio (Real) (RHS)

Dotted lines are est. geometric annual averages (1900-2011)

(Includes CE estimatesthrough 29-May-2012)

-20

-10

0

10

20

30

40

50

60

-20

-10

0

10

20

30

40

50

60

1985 1990 1995 2000 2005 2010

US Less Euro-zone

US

Euro-zone


7/12


Emerging MarketsThe spread of the JP Morgan EMBI+ Global Index over Treasuries rose by more than 90bp in May to well above

400bp for the first time this year (1). Contributions to the substantial increase in the overall EMBI+ spread during

the month were broad-based. The biggest contribution came from Venezuela, where there is considerable

uncertainty about the political outlook and whose economy is heavily reliant on crude oil, the price of which

dropped sharply during the month (2).

Equities in emerging markets generally fared less well than those in developed markets. Emerging Europe faredworst in this regard among the main emerging market regions given its close ties to the euro-zone, while Asia ex

Japan performed least badly (3). That being said, the stock market in India fell sharply in dollar terms as foreign

investors withdrew capital (4).

The dollar strengthened nearly 4% against the currencies of the USs other important trading partners (5). Amongthe BRICs, the Russian rouble fell by about 12% against the greenback as the price of oil retreated (6).

1. EMBI Spread vs. US Corporate Bond Spread vs. CE EstimateOf S&P 500 Equity Risk Premium (bp)

2. Approximate Contributions To Change In EMBI+ StrippedSpread (bp) (30-Apr-12 to 31-May-12)

3. Developed & Regional Emerging Equity Market Indices($ Basis, Rebased at Jan-09 = 100)

4. Foreign Flows Into Indian Stock Market vs. Sensex

5. US Dollar Trade-Weighted Indices(Rebased at Jan-07=100)

6. Selected Emerging Market Currencies vs. US Dollar(Rebased at Jan-07=100)


0

100

200

300

400

500

600

0

100

200

300

400

500

600


US 7-10 Year, BBB-Rated Corp. Bond Spread

S&P 500 CE Equity Risk Premium

EMBI+ Spread

-5

0

5

10

15

20

25

30

-5

0

5

10

15

20

25

30 EMBI % weights at 1-May-2012 shown in brackets

70

90

110

130

150

170

190

210

230

250

70

90

110

130

150

170

190

210

230

250

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

Developed MarketsEmerging EuropeAsia ex JapanLATAM

-20

-10

0

10

20

30

40

50

7,500

10,000

12,500

15,000

17,500

20,000

22,500

25,000

2007 2008 2009 2010 2011 2012

Indian Stock Market (Sensex, LHS)

Net Foreign Flows Into Indian StockMarket ($bn, 12m rolling, RHS)

80

85

90

95

100

105

110

115

120

80

85

90

95

100

105

110

115

120

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Broad

Major

Other Imp. Trading Partners (EM Proxy)

60

70

80

90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150


Russian Ruble

Brazilian RealChinese Renminbi


8/12


CurrenciesThe euro fell sharply against the US dollar during May. The trigger was the escalation of the euro-zone crisis, which

prompted an increase in investors perceptions of sovereign credit risk in the euro-zone relative to in the US (1). The

gap between the expected level of interest rates in the euro-zone and the US in a years time also remained very small,

thereby underpinning the greenback (2). Investors increased aversion to risk, which was reflected in the poor

performance of equities, also fuelled save haven demand for the US currency (3). Otherwise, speculative positioning

in favour of the US currency against the euro increased sharply to a new record level (4).

Sterling also lost ground against the dollar, but strengthened against the euro. The latter was again probably due to ashift in investors perceptions of relative sovereign credit risk in the UK and the euro-zone (5).

By contrast, the dollar weakened slightly against the yen amid the hunt for safety. The yen also remains supported by asmall US/Japan short-term interest rate differential (6) and a relatively conservative policy stance from the BoJ.

1. US Dollar/Euro & 5-Year Euro-zone vs US Sovereign CreditDefault Swap Premiums

2. US Dollar/Euro & Expected Interest Rate Differentials

3. US Dollar/Euro & US S&P 500 4. US Dollar/Euro & CFTC Net Non-Commercial Positioning

5. Euro/UK Pound Sterling & 5-Year Euro-zone vs. UKSovereign Credit Default Swap Premiums

6. Yen/US Dollar & US-Japan Yield Differential

Sources Thomson Datastream, Bloomberg

1.00

1.10

1.20

1.30

1.40

1.50

1.600

50

100

150

200

250

300


Euro-zone* Minus US 5yr Sovereign CDS Spread(bp) (LHS)Dollars/Euro (Inv.) (RHS)

*10 countries (ex Greece),Q4 2011 GDP-weighted

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

1.55

-100

-50

0

50

100

150

200

250

300


EUR less US O/N rate, 12m Forward (bp) (LHS)*

Dollars/Euro (RHS)

*3 day moving average

600

800

1000

1200

1400

1600

1800

1.10

1.20

1.30

1.40

1.50

1.60

1.70

Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Dollars/Euro (LHS)

US S&P 500 (RHS)

-250

-200

-150

-100

-50

0

50

100

150

200

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90


Net Speculative* Longs: Euro vs. Dollar (000s) (RHS)Dollars/Euro (LHS)

N.B. Difference in timing of weekly data

*Non-commercial

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35


-50

0

50

100

150

200

250

300 Euro-zone* Minus UK 5yr Sov. CDS (bp) (LHS)

Euro/Sterling (RHS)

*10 countries (ex Greece), Q4 2011 GDP-weighted70

80

90

100

110

120

130

-100

0

100

200

300

400

500

2006 2007 2008 2009 2010 2011 2012

US minus Japan 2-YearGovernment Bond Yield(Basis Points, LHS)

Yen/Dollar (RHS)

US yield lowerrelative to

Japan yield,yen stronger


9/12


VolatilityVolatility in the US Treasury market declined slightly in May (1).US equity market volatility also fell a little (2), but did implied volatility increased sharply (3).The volatility of the dollar against the euro increased (4), but not as much as implied volatility for the pair (5).The volatility of oil and gold prices both rose, but remained at low levels compared to recent years (6).

1. 10-Year Government Bond Yield Volatility(30-day historical, annualised)

2. Stock Market Price Volatility(30-day historical, annualised)

3. S&P 500 Volatility(Annualised)

4. Currency Volatility(30-day historical, annualised)

5. Currency Volatility(1-month, implied)

6. Commodity Price Volatility(30-day historical, annualised)


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


USEuro-zone (Germany)UK

Japan

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


US (S&P 500)

Euro-zone (DJ Stoxx)UK (FTSE 100)

Japan (Topix)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Actual (30-DayHistorical)

Implied (1 Month)

0%

5%

10%

15%

20%

25%

30%

35%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%


Dollar/EuroDollar/SterlingDollar/YenEuro/Sterling

0%

5%

10%

15%

20%

25%

30%

35%

40%

0%

5%

10%

15%

20%

25%

30%

35%

40%


Dollar/EuroDollar/SterlingDollar/YenEuro/Sterling

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%


Brent Crude Oil

Gold


10/12


CorrelationThe correlation between US government bonds and US equities became slightly less negative in May (1).The positive correlation between euro-zone equities and dollar/euro declined (2).The positive correlation between emerging market equities and emerging market bonds increased (3).The correlation between US government bonds and yen/dollar turned significantly more positive (4).The positive correlation between US equities and gold decreased (5).The positive correlation between dollar/euro and oil fell (6).

1. Equities & 7-10 Year Government Bonds(Correlation of Daily Returns During Past 6m)

2. Equities & Currencies(Correlation of Daily Returns During Past 6m)

3. Emerging Market Equities & Various Assets(Correlation of Daily Returns During Past 6m)

4. 7-10 Year Government Bonds & Currencies(Correlation of Daily Returns During Past 6m)

5. US Equities & Commodities(Correlation of Daily Returns During Past 6m)

6. Commodities & Currencies(Correlation of Daily Returns During Past 6m)


-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

-1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40


US Equities & US BondsGerman Equities & German BondsUK Equities & UK Bonds

Japanese Equities & Japanese Bonds

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00


US Equities & Dollar/YenEurozone Equities & Dollar/EuroUK Equities & Dollar/Sterling

Japanese Equities & Dollar/Yen

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20


EM Equities & Dollar/YenEM Equities & EM BondsEM Equities & US EquitiesEM Equities & US Bonds

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

-0.80

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20


US Bonds & Dollar/YenGerman Bonds & Dollar/EuroUK Bonds & Dollar/Sterling

Japanese Bonds & Dollar/Yen

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20

-0.60

-0.40

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

1.20


US Equities & Gold

US Equities & Brent Crude (Dated)

US Equities & Base Metals

-0.20

0.00

0.20

0.40

0.60

0.80

1.00

-0.20

0.00

0.20

0.40

0.60

0.80

1.00


Brent Crude (Dated) & GoldDollar/Euro & GoldDollar/Euro & Brent Crude (Dated)


11/12


12/12


Forecast Summary

Latest (1st Jun.)End End End End End End

Q312 Q412 Q113 Q213 2012 2013

Official Interest Rates

US 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25 0-0.25

Euro-zone 1.00 1.00 1.00 1.00 1.00 1.00 1.00

Japan 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10 0-0.10

UK 0.50 0.50 0.50 0.50 0.50 0.50 0.50

Currencies

$ / 1.23 1.15 1.10 1.10 1.10 1.10 1.10

/ $ 78 75 70 70 70 70 70

$ / 1.53 1.50 1.45 1.45 1.45 1.45 1.45

/ 0.81 0.77 0.76 0.76 0.76 0.76 0.76

/ 119 113 102 102 102 102 102

Bonds (10 year unless stated)

US 1.54 1.50 1.50 1.50 1.50 1.50 1.50

Germany 1.16 1.25 1.50 1.75 2.00 1.50 2.50

Japan 0.82 0.75 0.75 0.75 0.75 0.75 0.75

UK 1.50 1.50 1.50 1.50 1.50 1.50 1.50

EM (JP Morgan EMBI+ Spread, bp) 419 450 475 450 450 475 400

Stock markets

US (S&P 500) 1310 1350 1350 1350 1350 1350 1350

Germany (DAX 30) 6138 6000 5750 5750 5750 5750 5750

Japan (Nikkei 225) 8440 8250 8000 8000 8000 8000 9000

UK (FTSE 100) 5294 5150 5000 5000 5000 5000 5000

EM (MSCI $ Index) 906 900 900 950 950 900 1000

Commodities

Brent Crude Oil ($pb) 101 100 95 95 90 95 85

Gold ($/oz.) 1552 1800 2000 2000 2000 2000 2000

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Global Markets Chart Book (Jun 12)

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