Notes/Observations

– Japan Fin Min Aso sends JPY higher by ruling out consideration of foreign bond purchases and not considering changing BoJ law

- BOJ Meeting Minutes coming from a vocal minority of the board suggesting extending JGB purchases to 5-yr duration from the current 3-yr cap.

– RBA Feb meeting minutes more hawkish with its upbeat on regional recovery. Sees policy as already accommodative

- Spain bill auction results solid with amount just over indicated range and better bid-to-cover ratio

- German ZEW survey beats expectations for highest level since spring 2010

Economic Data

– (JP) Japan Dec Final Leading Index CI: 93.4 v 93.4 prelim; Coincident Index CI: 92.6 v 92.7 prelim

– (NO) Norway Q1 Consumer Confidence: 27.1 v 25.4 prior

– (JP) Japan Jan Nationwide Dept. Sales Y/Y: +0.2% v -1.3% prior; Tokyo Dept. Store Sales Y/Y: +0.5% v -1.1% prior

– (PH) Philippines Jan Balance of Payments: $2.0B v $0.6B prior

– (EU) Jan EU27 New Car Registrations: -8.7% v -16.3% prior

– (FI) Finland Jan CPI M/M: -0.1% v 0.7%e; Y/Y: 1.6% v 2.4%e

– (SE) Sweden Jan CPI Headline Rate M/M: -0.8% v -0.8%e; Y/Y: 0.0% v 0.0%e; CPI Level: 312.00 v 311.95e

– (SE) Sweden Jan CPI Underlying (CPIF) M/M: -0.7%e v +0.3% prior; Y/Y: 1.1e v 1.0% prior

– (SE) Sweden Jan Unemployment Rate: 8.4% v 8.6e; Unemployment Rate Seasonally Adj: 8.0% v 8.2e

– (EU) ECB: €3.5B borrowed in overnight loan facility vs. €1.8B prior; €143.5B parked in deposit facility vs. €131.9B prior

– (GR) Greece Dec Current Account: -€534M v -€850M prior

– (EU) Euro Zone Dec Construction Output M/M: -1.7% v -0.4% prior; Y/Y: -4.8% v -4.7% prior

– (EU) Euro Zone Feb ZEW Economic Sentiment Survey: 42.4 v 31.2 prior

– (DE) Germany Feb ZEW Economic Sentiment: 48.2 v 35.0e; Current Situation: 5.2 v 9.0e (3rd straight positive reading for survey and highest level since April 2010)

Fixed Income:

– (ZA) South Africa sold ZAR2.1B vs. ZAR2.1B indicated in 2031, 2036 and 2048 bonds

– (DK) Denmark sold total DKK5.385B in 2016 and 2023 bonds

– (ES) Spain Debt Agency (Tesoro) sold total €4.01B vs. €3.0-4.0B indicated range in 3-Month and 9-Month Bills

– Sold €886M in 3-month Bills; Avg Yield: 0.421% v 0.441% prior; Bid-to-cover: 5.76x v 4.18x prior; Max Yield: 0.445% v 0.460% prior; Tail: 2.4bps v 1.9bps prior (Jan 22nd)

– Sold €3.12B in 9-month Bills; Avg Yield: 1.114%; Bid-to-cover: 2.31x; Max Yield: 1.165% prior; Tail: 2.1bps

– (CH) Switzerland sold CHF813.8M in 6-Month Bills; Yield -0.077%

– (EU) ECB alloted €132.2B vs. €125Be in 7-Day Main Refinancing Tender at fixed 0.75%

– (HU) Hungary Debt Agency (AKK) sold HUF65B vs. HUF50B indicated in 3-Months Bills; Avg Yield 5.17% v 5.28% prior; Bid-to-cover: 2.36x v 1.94x prior

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

***Equities***

Indices: FTSE 100 +0.40% at 6,339, DAX +0.80% at 7,685, CAC-40 +1% at 3,704, IBEX-35 +0.60% at 8,151, FTSE MIB +0.80% at 16,534, SMI +0.40% at 7,529

- European equity markets are mostly higher, amid the release of mixed ZEW data out of Germany. Today’s gains have been led by the French CAC-40, following FY earnings from Danone.

- UK Movers [Morgan Sindall -8.5% (cut dividend), Severfield-Rowen -8% (warned on 2013,2014 targets), Vodafone -2% (broker commentary), Intercontinental -2% (profit-taking post earnings) Sainsbury -0.50% (broker commentary), HSBC -0.50% (broker commentary)]

- Germany movers [Kloeckner +7% (investor raised stake),Duerr +5.5% (Q4 results above ests), MTU Aero Engines +4.5% (sees double digit growth in FY13); Pfeiffer Vacuum -6% (FY12 results below ests),Kabel Deutscheland -2.5% (concerns related to Tele Columbus deal),BMW -0.50% (product recall)]

- France movers [Danone +5% (cost cutting measures), Carrefour +1% (broker commentary)]

– Switzerland movers [Nobel Biocare -2% (Q4 profits below ests)]

– Spain movers [Vueling Airlines +2.5% (bid speculation), Gas Natural +1% (FY results above ests)]

Speakers:

– France Foreign Min commented that its 2013 GDP target would likely to be cut to 0.2-0.3% from 0.8% currently

- EU’s Rehn commented that public finances were gradually improving in the region and added that countries could have longer time on achieving on deficit goals, if they are making structural efforts needed. The US/EU Trade deal of paramount importance and would have great growth potential

- ZEW Economists noted that the German economy could pick up more speed over the next few months as there were less headwinds from EMU crisis. About 1/3 of respondents expected an increase in rates over the next 6 months with 2/3 seeing rate unchanged. It expected only a modest appreciation in EUR currency and was not concerned over a currency war

- Japan PM Abe commented in parliament that he wanted to consider three open BOJ posts as one package and that balance to be a factor when making choices for positions (**Note: The Gov post and two deputy position will be vacated on March 19th)

- Japan Fin Min Aso commented in Parliament that the weakening of JPY currency was the result of policy and would not have further comment on foreign exchange

– Renewed speculation that China to raise fuel prices by CNY250-300, effective Feb 20th

Currencies:

– JPY currency maintained a firm tone during the European morning but off its best level ahead of the NY morning. Earlier in Asia Japan Finance Minister Aso stated that the Govt had no plans to buy foreign bonds and was not considering changing BoJ law. The difficulties in breaching the 95 handle in the post G20 environment help to trigger some squaring of JPY shorts. The USD/JPY tested 93.33 before before consolidating to 93.60.

– The Euro initially faced headwinds early in the session , particularly after a French official noted that it would cut its 2013 GDP outlook in half to around 0.3%. The EUR/USD tested 1.3330 but a better German ZEW Survey helped the currency to move off its worst level and was little changed from its Far East opening levels of 1.3350.

– Peripheral yields began the session widening with political uncertainty in Italy before elections on Feb. 24-25th. As the session progressed the Italian 10-year gov’t yield reversed its clime and was around 4.40% from 4.45% European equity opening levels.

Political/In the Papers:

– (EU) ECB’s Draghi: broad indicators of systemic risk have pulled back substantially – ESRB testimony

– (DE) German Chancellor Merkel: global financial regulation still needs to be beefed up; see no room for tax cuts in Germany – address Chamber of Commerce in Mainz

– (GR) Greece to hold talks with Troika next week after Jan saw a serious shortfall in Rev – ekathimerini

– (IE) Ireland looking to persuade European finance ministers to reschedule repayments on its €67.5B as early as next month – financial press

-(US) Goldman Sachs chief economist Hatzius: US economy to see sluggish growth in 2013; Will see “substantial acceleration” in 2014

– (JP) Japan Econ Min Amari: Buying foreign bonds is just one option, clarifies that PM Abe was speaking “generally” in regards to foreign bond buying – financial press; Clarifies PM Abe’s statement further saying buying foreign bonds is a theoretical possibility for any nation; Reminder Feb 17: Japan PM Abe: Will leave monetary policy to Bank of Japan (BoJ); Still aware of possibility for BOJ to buy foreign bonds.

-(JP) Japan Chief Cabinet Secy Suga: Plans to present BoJ nominees next week, following PM Abe’s US trip – Japanese press

Looking Ahead

***All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)

– (IE) Ireland Presidency holds negotiation meeting on Basel III

– (ES) Spain PM Rajoy State of the Nation debate

– (NO) Norway Central Bank Gov Olsen speaks in Oslo

– (IS) Israel Feb Inflation Forecast: No est v 2.0% prior

– (IS) Israel Jan Money Supply Y/Y: No est v 9.8% prior

– (ES) Spain Dec Trade Balance: No est v -€1.4B prior

– (BE) Belgium Debt Agency syndicate results expected for Jun 2018 notes

– 06:00 (PT) Portugal Jan Producer Prices M/M: No est v -0.4% prior; Y/Y: No est v 3.6% prior

– 06:00 (EU) OECD Q4 GDP No est v +0.3% prior

– 06:00 (EU) ESM to sell up to €2.0B of 6-month bills; Avg Yield % v +0.0245% prior; Bid-to-cover: x v 2.3x prior (Jan 22nd)

– 06:00 (TR) Turkey to sell 2015 and 2022 bonds

– 06:30 (US) Daily Libor Fixing

– 07:00 (EU) ECB allotment in 7-day Term Deposit Tender to offset Govt bond purchases; Target to drain €205.5B

- 07:00 (TR) Turkey Central Bank Interest Rate Decision: Expected to leave Benchmark Repo Rate unchanged at 5.50%; leave Overnight Lending Rate unchanged at 8.75%; Leaves Overnight Borrowing Rate unchanged at 4.75% prior

– 07:00 (BR) Brazil Dec Retail Sales M/M: 0.9%e v 0.3% prior; Y/Y: 7.4%e v 8.4% prior; Broad Retail Sales Y/Y: 7.0%e v 7.2% prior

– 08:00 (PL) Poland Jan Sold Industrial Output M/M: +2.7%e v -14.2% prior; Y/Y: -3.0%e v -10.6% prior

– 08:00 (PL) Poland Jan Producer Prices M/M: +0.2%e v -0.6% prior; Y/Y: -1.1%e v -1.1% prior

- 08:30 (CA) Canada Dec Int’l Securities Transactions: C$6.8Be v C$5.6B prior

– 08:30 (CA) Canada Dec Wholesale Sales M/M: -0.4%e v +0.7% prior

– 09:00 (EU) EU’s Barnier

– 09:00 (BE) Belgium Feb Consumer Confidence: No est v -23 prior

– 09:00 (EU) ECB weekly Forex Reserves

– 10:00 (US) Feb NAHB Housing Market Index: 48e v 47 prior

– 10:00 (MX) Mexico weekly International Reserves

– 11:00 (US) Fed to purchase $1.25-1.75B in bonds

– 11:00 (BR) Brazil to sell I/L 2018 and 2022 Bonds

– 11:30 (US) Treasury to sell $65B in 3-Month and 6-Month Bills

– 12:15 (CH) SNB’s Jordan speaks in Zurich

– 14:15 (EU) ECB’s Asmussen (Germany) Speaks in Bratislava

– 16:45 (NZ) New Zealand Q4 Producer Prices- Inputs Q/Q: No est v -1.0% prior; PPI Outputs Q/Q: No est v -0.9% prior

- 18:50 (JP) Japan Jan Merchandise Trade Balance: ¥1.379Te v -¥641.5B prior; Adj Merchandise Trade Balance: +¥586.7B v -¥88.7B prior

– 20:30 (JP) BOJ Board Member Morimoto speech

– 21:30 (NZ) RBNZ Governor Wheeler speaks in Auckland