Barclays Euro Weekly

Research
European Economics & Rates Strategy

4 October 2013
Euro Weekly
Economics
Euro area: Europe slowly leaving the demons behind
3
Cyclical indicators show euro area growth strengthening while retail sales growth and a
reversal in the deterioration of the labour market to some upside risk on consumption.
UK: Politics start to drive economic policy
5
The centrality of the economy to the political discourse was underscored by several
new policy announcements designed to cement the governments standing.
Rates Strategy
Euro Area: EUR long end and UFR committee proposal
20
We think the proposed UFR committee changes might help to make the EUR 10s/30s
curve slightly more resilient to a US-led potential flattening of the 10s/30s developed
market curves. However, we would not chase the 10s/30s steepening, even if carry is
still attractive.
Money Markets: Liquidity evolution under the ECBs attention
23
Over the past month, euro short rates have declined, reflecting dovish Fed comments
and the ECBs suggestion of the possibility of another LTRO. We expect the 1y1y Eonia
forward to keep trading at 35-45bp.
Sovereign Spreads: Q4 and 2014-15 Supply Outlook
26
We forecast gross supply for the remainder of 2013 at c.168bn, resulting in total net
issuance of just under 48bn. We look for 2014 gross bond issuance in the euro area to
show a decrease of about 5bn, with total gross issuance forecast at 872bn.
UK: Post-supply flattening bias in long gilts
30
Some concession seems likely into upcoming ultra-long supply. However, the relatively
light supply schedule and improving funding position of defined benefit schemes
suggests that the long end can richen, and the curve flatten into year-end.
Covered Bonds and SSA: Short-term supply and Spain relative value update
33
In this weeks AAA Investor, we provide an update on supply conditions in the covered
bond and SSA markets. We also look at relative value opportunities in Spain between
covered bonds and senior unsecured debt.
Scandinavia: Sweden: Ready for a change of pace?
34
With the cyclical outlook improving, we still see value in holding SEK/EUR
1y1y/1y2yfwd steepeners. We also recommend entering 3m Sep 14/Sep 15
steepeners and hold on to our 10y SGB ASW wideners.
UK Inflation-Linked: Priced to go
36
The IL19 is cheap into its forthcoming auction, and offers structural value but concerns
about the depth of structural 5y linker demand may constrain any outperformance.
Volatility: Long GBP 3m*5y
37
We recommend buying GBP 3m*5y low-strike receivers, delta-hedged and initiating 1m
vs. 3m*5y calendar spread as current implied vol levels on 5y tails are low enough to
benefit from volatility due to the data-dependent guidance introduced by the MPC.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 37
Economics
Philippe Gudin
+33 (0)1 4458 3264
philippe.gudin@barclays.com
Rates Strategy
Laurent Fransolet
+44 (0)20 7773 8385
laurent.fransolet@barclays.com
Global Traders Guide
Global Economics Calendar
Critical events calendar for US, Euro Area,

Japan and UK
15
Euro Data Review and Preview
17
UK Data Review and Preview
19
Global Supply Calendar
41
Global Bond Yield Forecasts
42
All content in this report is previously

published. The Economics section is excerpted
from Global Economics Weekly. Rates Strategy
is excerpted from the Global Rates Weekly.
Calendars and key events are excerpted from
the Global Traders Guide. View the full reports,
including analyst certifications and other
required disclosures, by clicking on the
hyperlinks of these publications or by going to
our research portal on Barclays Live.
www.barclays.com
INSTITUTIONAL INVESTOR
ALL-EUROPE FIXED INCOME RESEARCH
SURVEY 2014
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Investor All-Europe Fixed Income
Research Team Survey 2014. Barclays
Research would welcome your support.
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Assistance Page.
Barclays | Euro Weekly
EURO AREA ECONOMIC FORECASTS

2012
2013
2014
% change q/q
Q1
Q2
Q3
Q4
Q1
Q2
Q3E
Q4E
Q1E
Q2E
Q3E
Real GDP
-0.1
-0.3
-0.1
-0.5
-0.2
0.3
0.2
0.3
0.3
0.4
0.4
Calendar year average

Q4E 2011 2012 2013E 2014E
0.4
...
...
...
...
Real GDP (saar)
-0.4
-1.1
-0.4
-1.9
-0.6
1.2
0.7
1.1
1.2
1.6
1.6
1.5
...
...
...
...
Real GDP (y/y)
-0.2
-0.5
-0.7
-1.0
-1.0
-0.5
-0.2
0.6
1.1
1.2
1.4
1.5
1.6
-0.6
-0.3
1.3
Private consumption
-0.4
-0.6
-0.1
-0.5
-0.2
0.2
0.0
0.1
0.1
0.2
0.2
0.2
0.3
-1.4
-0.6
0.5
Public consumption
-0.3
-0.3
-0.2
0.1
0.0
0.4
0.0
0.1
0.1
0.2
0.2
0.2
-0.1
-0.6
0.2
0.6
Investment
-1.1
-1.9
-0.4
-1.2
-2.2
0.3
0.1
0.3
0.4
0.7
0.8
0.7
1.7
-3.7
-3.5
1.8
- Residential construction
-0.5
-1.6
-0.2
-1.5
-1.6
0.7
-0.2
-0.1
0.0
0.2
0.4
0.3
0.2
-3.3
-2.8
0.5
- Non-residential construction
-2.2
-2.0
-0.4
-1.3
-2.9
-0.5
0.0
0.1
0.3
0.4
0.5
0.5
-0.5
-4.9
-4.8
1.0
- Non-construction investment
-0.8
-2.0
-0.5
-1.0
-2.2
0.4
0.3
0.7
0.8
1.0
1.1
0.9
4.0
-3.2
-3.1
3.2
Inventories contribution (pp)
0.0
-0.1
-0.2
-0.2
0.4
-0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.2
-0.5
0.1
0.0
Final dom. demand cont. (pp)
-0.5
-0.8
-0.2
-0.5
-0.5
0.2
0.0
0.1
0.2
0.3
0.3
0.3
0.5
-1.7
-1.0
0.8
Net exports contribution (pp)
0.4
0.5
0.2
0.1
0.0
0.2
0.1
0.1
0.1
0.1
0.1
0.1
0.9
1.6
0.5
0.4
Industrial output (ex construct.) -0.5
-0.7
0.2
-2.0
0.2
0.6
-0.1
0.3
0.3
0.3
0.4
0.5
3.2
-2.3
-0.9
1.2
Employment (q/q)
-0.2
-0.1
-0.1
-0.3
-0.4
-0.2
-0.1
0.0
0.1
0.1
0.2
0.2
0.3
-0.7
-1.0
0.3
Unemployment rate %
10.9
11.3
11.5
11.8
12.0
12.1
12.0
12.1
12.2
12.2
12.2
12.1
10.2
11.4
12.0
12.2
CPI inflation (y/y)
2.7
2.5
2.5
2.3
1.9
1.4
1.3
1.1
1.0
1.3
1.1
1.2
2.7
2.5
1.4
1.2
1.0
Core CPI (ex food/energy) y/y
1.5
1.6
1.6
1.5
1.4
1.1
1.0
0.9
1.0
1.1
1.0
0.9
1.4
1.5
1.1
Current account % GDP
0.9
1.2
1.5
1.8
2.5
2.6
2.7
2.8
2.8
2.8
2.8
2.8
0.1
1.3
2.6
2.8
Government balance % GDP
-4.2
-3.7
-2.9
-2.3
1.00
1.00
0.75
0.75
0.75
0.50
0.50
0.50
0.50
0.50
0.50
0.50
1.00
0.75
0.50
0.50
Refi rate (period end %)
Note: All numbers expressed in % q/q unless otherwise specified. Source: Barclays Research
SUMMARY OF VIEWS
Direction
Negotiations in the US on the debt ceiling/government shutdown should set the tone for markets in Europe. On the supply side,
the focus will be on Italian supply next week, although Italian politics are unlikely to attract the same level of attention going
forward (despite the Italian Senate committees decision to expel Berlusconi) following PM Lettas successful confidence vote.
UK: Short rates remain under pressure as the term premium is rising and data have continued to surprise to the upside.
Curve/
curvature
Hold onto receive EUR 5y5y/5y10y/5y15y fwds.

Hold onto pay EUR 5y10y/5y15y/5y20y fwds.
UK: Some steepening likely into ultra-long supply at the end of October, but into year end, the long end should outperform
outright and on the curve . Pay GBP 1y3yfwd/1yr4yr fwd spread.
Swap
spreads
EUR: Keep long 10s/30s ASW box in France.

EUR: Keep long Bund ASW on a strategic basis, keep long Bund ASW on the Bobl/Bund ASW box.
GBP: More QE looks unlikely for now, leaving spreads vulnerable given gilt supply outlook for next few years remains heavy.
Other
spread
sectors
SEK: Keep SEK 1y1y/1y2yfwd steepeners versus EUR and SEK 10y ASW wideners. Hold Spain 5s/10s/30s.
Long 5-8y Netherlands and Finland versus France.
Long 8-9y Belgium versus France.
Inflation
Euro: Steepness of real yield curve and lack of supply susceptible to support in the very long end.
UK: IL19 offers structural value, but depth of demand for the sector is unclear.
Volatility
Buy EUR 6m (5-30y) curve floors contingent on 5y swap rate below a certain level to hedge an unexpected risk-flare in the
Eurozone.
Buy EUR 6y*5y vs. 1y*(5y5y) to position for a steepening of the vol surface
Source: Barclays Research
4 October 2013
EURO AREA OUTLOOK
Europe slowly leaving the demons behind

Cyclical indicators show euro area growth strengthening while retail sales growth and a
Fabrice Montagne
reversal in the deterioration of the labour market to some upside risk on consumption.
+33 (0) 1 4458 3236

fabrice.montagne@barclays.com
As the ECB repeated last months messages, we continue to expect a VLTRO to be

triggered before year end to help establish the single supervisor mechanism.
Political impasse in Italy was resolved as PDL dissenters support the government.
Short-term risks have somewhat abated but Italys political future is still unclear.
This weeks data releases pave the way for better days ahead
Stronger PMIs slightly above
the 50 point mark supports our
gradual recovery scenario
September final PMIs came in higher for the sixth consecutive month, this time rising by 0.7
points to 52.2, owing mainly to a robust catch up by the service sector, reaching levels not
seen in more than two years (June 2011). Overall, this months rise was once again driven by
stronger forward-looking and employment components. On a country level, France is
catching up while Italy surged on services increasing by nearly 4 points. Spain, Ireland and, to
a lesser extent, Germany consolidated. Our PMI-based GDP indicator for the euro area is now
in line with our forecast of 0.2% q/q GDP growth. For countries, GDP indicators are in line
with our Q3 forecast in Germany (+0.4% q/q), slightly more pessimistic in France (-0.1% vs.
0.0%) and slightly more optimistic in Italy (0.1% vs. 0.0%) and Spain (+0.3% vs. 0.1%). That
said, over the recent quarter, PMIs have been downwards biased in France and upwards
biased in Spain, hence we see this weeks release as further support of our expectations.
Looking ahead, we do not expect surveys to improve much further as their current levels are
already consistent with GDP accelerating very gradually in the coming quarters.
Retail sales point to some

upside risk to our private
consumption forecast in Q3
while labour markets have
turned around
August retail sales in the euro area came in on the stronger side, posting a +0.7% m/m
increase in addition to being revised up from +0.1% to +0.5% in July. With a +0.7% q/q carry
over for Q3, retail sales now point to some upside risks to our forecast of flat consumption
in the third quarter. While we do not see private consumption a main driver of activity
neither this year nor next we acknowledge that rising consumption supported strongerthan-expected growth in Q2 and might surprise again on the upside. In particular, labour
markets have now turned the corner and any stronger-than-anticipated improvement in
FIGURE 1
PMI employment component edging up across the euro area
FIGURE 2
Excess job shedding relative to GDP seems to be over
2.5%
60
-900
2.0%
-600
1.5%
55
50
1.0%
-300
0.5%
0.0%
300
-0.5%
45
600
-1.5%
40
Euro Area
Germany
Spain
35
07
08
09
10
Source: Haver Analytics, Barclays research
4 October 2013
11
12
-2.0%
France
Italy
-2.5%
Real GDP (% q/q, 1 quarter

lag, LHS)
Unemployed (thous, %
3mma, RHS, inverted)
Forecast
-1.0%
-3.0%
13
14
900
1200
1500
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Source: Eurostat, Haver analytics, Barclays Research

employment will have a direct effect through rising revenues and an indirect effect through
confidence. Euro area unemployment of 12.0% in August was stable versus July (revised
down) and down 0.1pp versus June.
ECB keeps all options on the table to avoid liquidity accidents

ECB dancing sideways waiting
for next years banking union
to provide the much expected
game changing drive to a euro
area sustained recovery
ECB president Mario Draghi repeated the previous Governing Council message that it was
seeking to keep all options open. His economic assessment showed downwards risks on
growth while the picture for inflation was seen are balanced. We continue to envisage
another very long-term refinancing operation (VLTRO) before year end if the liquidity
surplus continues to shrink in the coming months and pushes Eonia higher. An interest rate
cut remains unlikely in our view, unless economic activity takes a step back and the forward
guidance is likely to remain unchanged in the coming months with the next step being to
remove the downward bias should the economic situation further improve. Concerning the
upcoming Asset Quality Review (AQR), Mr Draghi repeated that details will be released in
the second half of October. In his own words, to be credible, the AQR will need to be
rigorous and transparent.
Political mayhem in Italy deters

investors showing preference
for Spain
When Mr Berlusconi announced his party would withdrew support for the government,
fears that political instability would bring the country a few month back to when President
Napolitano struggled to form a government. Under the pressure of his own party dissenters,
Mr Berlusconi eventually backed down and PM Letta passed confidence vote in Parliament
on Wednesday. This epic showdown gives a temporary conclusion to months of political
mayhem during which Investors have been favouring low key Spain to facetious Italy. Since
1st of August the 10 year yield spread between Italy and Spain has widened 40bp to the
point that Spanish 10 year rates fell below Italian beginning of September.
Political future still to be

determined but short-term
risks abate
Looking ahead, it is unclear whether Mr Berlusconis PDL party will remain as one or whether
Mr Alfano will lead the dissenters to split and create a new political formation. The support of
the dissenters for the current government should nonetheless lower the risk of political
upheaval in the short term. But whatever the arithmetic, any governing majority will remain
fragile until the electoral law is changed. Hence, we continue to think that snap elections will
be held in Q1/(early) Q2 next year but a plausible alternative scenario would be that this
government holds on until mid 2015 conditional to further PDL dissenters or 5SM support.
Italy: an epic week ends on a reassuring note for short-term political stability
FIGURE 3
ECB: Monetary policy expectation cooling down (1Y1Y fwd)
0.90
0.80
4.7
euro area
(%)
IT
4.6
US
0.70
FIGURE 4
Italy paying the price for political instability (10Y bond yield)
SP
4.5
UK
0.60
4.4
0.50
0.40
4.3
0.30
4.2
0.20
Jan
Feb Mar
Source: Barclays Live
4 October 2013
Apr
May
Jun
Jul
Aug
Sep
26 Sep
19 Sep
12 Sep
05 Sep
29 Aug
22 Aug
15 Aug
0.00
08 Aug
01 Aug
4.1
0.10
Oct
Source: Haver Analytics, Barclays Research
UK OUTLOOK
Politics start to drive economic policy

The centrality of the economy to the political discourse was underscored by several
Simon Hayes
+44 (0)20 7773 4637
simon.hayes@barclays.com
new policy announcements designed to cement the governments standing.
The government has brought forward the second leg of its Help to Buy scheme, a
measure that is likely to add to house price pressures.
The Chancellor also announced plans for a new fiscal rule and his intention to hold
fuel duty fixed for the rest of the parliament.
The government this week
made several new policy
announcements to counter
opposition gains on
economic policy
Ever since the global financial crisis, the economy has been central to the political discourse
in the UK, and remains so. The opposition Labour Party saw a sharp increase in its lead in
the polls last week following the announcement that it would freeze domestic energy prices.
Pollsters have warned that such bounces often prove fleeting, however, and the
Conservatives still hope that their greater poll standing on economic competence will secure
them an outright majority in the May 2015 election.
Despite the fact that the general election is still more than 18 months away, the parties have
begun positioning themselves for that battle, with several eye-catching measures
announced at the recent party conferences. In particular, the government has brought
forward the second leg of its Help to Buy housing support scheme, announced its intention
to introduce a new fiscal rule and said it hopes to hold fuel duty unchanged for the
remainder of the parliament.
The controversial second leg of

Help to Buy has been brought
forward by three months
To recapitulate, the governments Help to Buy scheme has two parts (which we label HtB1
and HtB2). HtB1 is already in operation, and provides a low-cost equity loan to first-time
buyers for the purchase of newly-built properties. HtB1 has been generally lauded for
encouraging more house building and revitalising interest from first-time buyers, and there
is plenty of anecdotal evidence to support this assessment.
HtB2, by contrast, has been criticised by many commentators, sometimes in colourful and
withering terms. The scheme, which is now to come into operation next week, three
months ahead of the original schedule, aims to increase the provision of mortgages with a
loan to value (LTV) ratio above 80% by providing insurance for the lender against a first-
FIGURE 1
Houses remain expensive relative to household income
Ratio
FIGURE 2
The PMIs suggest upside risks to our Q3 GDP growth estimate
6.5
% q/q
1.5
6.0
1.0
5.5
Barclays Q3 13
forecast
0.5
5.0
0.0
4.5
4.0
-0.5
3.5
3.0
-1.0
2.5
-1.5
2.0
69 72 75 78 81 84 87 90 93 96 99 02 05 08 11
Ratio of house prices to household income
4 October 2013
-2.0
-2.5
PMI-based GDP indicator

GDP
00 01 02 03 04 05 06 07 08 09 10 11 12 13

tranche loss in the event of default. HtB2 is broader in scope than HtB1: availability will not
be restricted to first-time buyers, nor to the purchase of newly built houses. The
governments view is that the absence of higher LTV mortgages is a sign of market failure
and is socially undesirable. Critics, however, have claimed the policy may encourage a
return to high-risk lending and is likely to provide an undesirable boost to prices.
The problem in assessing the likely consequences of HtB2 is that, at the time of writing, we
do not know the price of the insurance, which is crucial because it will determine the takeup of the scheme by the lenders. It is also worth noting that, according to a report in the
Financial Times, lenders are generally lukewarm on the scheme, and only the two
government-controlled banks have so far signed up to it. The schemes launch could
therefore be something of a damp squib.
We do not see HtB2 as a threat
to financial stability, but it is
likely to boost house prices,
with questionable benefit
In our view, the threat to financial stability from HtB2 is likely to be small. It will require
borrowers to put down a deposit of at least 5% of the value of the property (ie the LTV is
capped at 95%), an amount that was considered normal for many years prior to the
financial crisis. Moreover, the government has asked the Bank of Englands Financial Policy
Committee to assess the scheme annually. However, HtB2 is likely to add to price pressures
in the housing market, and with house prices already stretched relative to household
incomes (Figure 1) it is not clear what economic benefit is likely to flow from this.
The Chancellor is to commit to

delivering a budget surplus in
the next parliament
The government currently operates under a single fiscal mandate, which is to have the
cyclically-adjusted current budget in surplus at a rolling five-year horizon. The fact that the
horizon rolls has prompted criticism that the target imposes inadequate discipline. This
week, Chancellor Osborne announced that he plans to introduce a new fiscal mandate
committing the government to running a budget surplus by 2020. He indicated that this
would be achieved by continuing to squeeze welfare and other public spending, potentially
paving the way for tax cuts towards the end of what would be a decade-long austerity drive.
The proposed fuel duty freeze

should have a small
moderating effect on inflation
The Chancellor also said he plans to freeze fuel duty for the remainder of this parliament, so
long as he can find the necessary savings to pay for it within the existing spending envelope.
This move is designed to counter the Labour Partys accusation that the improvement in the
economy is not being reflected in households living standards. The measure is not large,
however, knocking only about 0.05pp off annual CPI inflation.
The ongoing improvement in the economy was evident in the September PMIs, released
this week. Although all three of them services, manufacturing and construction declined
on the month, the implied pace of expansion remained high. Our composite PMI implies
GDP growth of about 0.9% q/q in Q3, above our official estimate of 0.7% growth (Figure 2).
As the election looms, public

finance consolidation is likely
to be less of a drag on demand
4 October 2013
With economic management apparently top of the agenda for the 2015 election we have
probably entered a period in which there is an increased likelihood of snap policy
announcements, driven more by political expediency than by longer-term economic
considerations. The oversight of the Office for Budget Responsibility should provide some
assurance that new measures will be properly costed and that their effect on the public
finances are accurately assessed. However, with the austerity debate now extending into
the next parliament, the fiscal discipline running up to the election may be somewhat
flexible, so that public finance consolidation poses less of a headwind to demand than has
previously been the case.
GLOBAL TRADERS GUIDE
Key data and events

US
Next week sees various international meetings (10-13 Oct.) in Washington and the
release of the IMFs latest forecasts. Policymakers are likely to emphasise the need for
resolution in the US Congressional fiscal stand-off.
Europe
We expect Aug. French IP to have increased by 0.5% m/m (Thu.; consensus: 0.6%; last:0.6%). We forecast Aug. Italian IP to have risen by 0.5% m/m (Thu.; consensus: 0.7%; last:
-1.1%). In Germany, we project Aug. IP to have bounced back, recording a growth of 2.0%
m/m (Wed.; consensus: 1.0%; last: -1.7%).We and the consensus look for the preliminary
estimates of Sep. HICP for Germany (Fri.; last: 1.6% y/y), Spain (last: 0.5% y/y) and Italy
(last: 0.9% y/y) to be confirmed in the final releases. We and the consensus estimate
German Aug. factory orders to have inched upward by 1.0% m/m as foreshadowed by
strong VDMA machinery orders (Tue.; last: -2.7%).
In the UK, we expect the BOE to maintain its policy rate at 0.50% and asset purchases at
375bn (Thu.). We forecast Aug. IP to have risen by 0.1% m/m (Wed.; consensus: 0.4%;
last: 0.0%) and manufacturing output to have increased by 0.2% m/m (consensus: 0.4%;
last: 0.2%). We expect Aug. trade deficit to have narrowed to 9.0bn (Wed.; consensus: 8.8bn; last: -9.9bn).
Asia
In Japan, we look for Aug. core machinery orders to have increased by 4.2% m/m (Thu.;
consensus: 2.5%; last: 0.0%). Q2 capex rose 1.2% q/q, the first gain in six quarters,
according to the second preliminary GDP release. We and the consensus expect Chinese
Sep. exports to have increased by 5.0% y/y (next Sat.; last: 7.2%). We project Chinese
imports to have grown by 6.3% y/y (consensus/last: 7.0%). We forecast Sep. new CNY
loans disbursed to have fallen to CNY675.0bn (Thu.; consensus: CNY658.6bn; last:
CNY711.3bn). We look for Aug. Indian IP growth to have declined to 2.0% y/y (Fri.; last:
2.6%). We expect Bank Indonesia to hike the FASBI rate 25bp but to keep the BI rate
unchanged (Tue.; consensus/last: 7.25%).
4 October 2013
GLOBAL WEEKLY CALENDAR

Saturday 05 October
17:00 Colombia: CPI, % m/m
Sunday 06 October
22:30 Australia: AIG/HIA construction PCI, index
Monday 07 October
09:30
11:15
00:30
05:30
08:00
08:00
09:00
09:00
11:30
12:30
19:00
21:00
23:01
23:01
23:50
02:30
04:00
09:30
12:50
Sep
Period
Sep
Period
Prev -3
Prev -2
Prev -1
0.23
0.04
0.08
Prev -3
Prev -2
Prev -1
39.5
44.1
43.7
Prev -3
Prev -2
Prev -1
Luxembourg: Parliament dissolved

E17: ECB Executive Board member Asmussen speaks on "Markets in Transition" in Germany
E17: ECB Executive Board member Praet speaks on Japanese economy in Brussels
Philippine: Foreign Reserves, USD bn
Sep
81.3
83.2
Ukraine: CPI, % y/y (to 10/10)
Sep
-0.1
0.0
Taiwan: CPI, % y/y
Sep
0.60
0.06
Australia: Foreign Reserves, AUD bn
Sep
51.9
55.5
Taiwan: Exports, % y/y
Sep
8.7
1.6
Norway: Manufacturing production, % m/m (y/y)
Aug
-1.7 (2.8)
2.9 (6.1)
Singapore: Foreign Reserves, USD bn
Sep
259.8
261.1
Malaysia: Foreign Reserves, USD bn
Sep
136.1
137.8
Chile: Economic activity index, % y/y
Aug
3.8
4.1
Canada: Building permits, % m/m
Aug
5.8
-10.6
US: Consumer credit, chg, $ bn
Aug
16.0
11.9
New Zealand: NZIER business opinion, index
Q3
20
23
UK: BRC total sales, % y/y
Sep
2.9
3.9
UK: RICS house price balance
Sep
22
37
Japan: Current account SA, JPY bn
Aug
623.3
646.2
Malaysia: 5y/7y/10y Bonds auction (to 31/10)
Korea: 3y/30y Bonds auction
Malaysia: 91d/154d/210d Bills auction
Holland: DTC 30 Dec2013, 30 Jun 2014
France: BTF 02Jan2014, 20Mar2014, 18Sep2014
Tuesday 08 October
16:25
16:30
00:30
00:30
00:30
00:30
05:45
06:00
06:30
06:45
06:45
07:00
07:15
07:15
10:00
11:00
11:00
12:15
12:30
12:30
Period
Period
Prev -3
82.9
-0.4
-0.79
55.7
3.6
0.1 (5.7)
261.9
134.8
5.3
20.7
10.4
32
3.6
40
333.7
Forecast Consensus
-
0.18
Forecast Consensus
-
Forecast Consensus
-0.2
-0.3
-1.5
4.1
14.0
40
443.9
-0.4
0.10
-1.2
-0.1
3.8
12.0
42
643.6
KRW 1850/700 bn
MYR 1.0/1.0/0.5 bn
1-2;1-2 bn
3.6-4.0;1.4-1.8;1.2-1.6 bn
Prev -2
Prev -1
Indonesia: Bank Indonesia Reference rate, %

Oct
6.50
7.00
US: Cleveland Fed President Pianalto (FOMC non-voter) speaks in Pennsylvania
US: Philadelphia Fed President Plosser (FOMC non-voter) speaks in Pennsylvania
Singapore: GDP, advance estimate, % y/y (to 14/10)
Q3
1.5
0.2
Japan: Economy watchers' DI
Sep
53.0
52.3
Australia: Business confidence, index
Sep
-0.6
-3.4
Australia: Business conditions, index
Sep
-7.9
-7.1
Australia: Job advertisements, % m/m
Sep
-1.6
-1.1
Australia: Overseas arrivals, % m/m
Aug
Swi: Unemployment rate (adj), %
Sep
3.2
3.2
Germany: Trade balance sa, bn
Aug
13.6
17.0
France: BdF industrial business sentiment, index
Sep
96.4
94.9
France: Trade balance, bn
Aug
-5.8
-4.5
France: Budget, year-to date, bn
Aug
-72.6
-59.3
Spain: Industrial production (wda), % y/y
Aug
-1.5
-2.2
Swi: CPI, % m/m (y/y)
Sep
0.1 (-0.1) -0.4 (0.0)
Swi: Retail sales, % y/y
Aug
1.5
2.3
Germany: Factory orders, %m/m (y/y)
Aug
-0.5 (-1.8)
5.0 (5.6)
Chile: CPI, % m/m
Sep
0.6
0.3
Brazil: IGP-DI inflation, % m/m
Sep
0.76
0.14
Canada: Housing starts, thous saar
Sep
193.4
193.0
Canada: Int'l merchandise trade, $ bn
Aug
-1.3
-0.5
US: Trade balance, $ bn
Aug
-43.7
-34.5
7.25
Forecast Consensus
7.25
7.25
3.8
51.2
5.7
-6.3
-2.0
3.2
16.1
96.5
-5.1
-80.8
-1.4
-0.1 (0.0)
0.8
-2.7 (2.0)
0.2
0.46
180.2
-0.9
-39.1
3.8
1.0 (4.1)
0.4
1.35
-40.0
3.8
52.0
3.2
15.0
-4.8
-0.3
0.2 (-0.1)
1.0
1.0 (4.0)
0.5
1.50
175.0
-0.7
-39.3
Note: All times reported in GMT. Some data or events are boxed to indicate their importance to financial markets. Market events are highlighted in light blue. Auction
sizes are all Barclays estimates
4 October 2013

Tuesday 08 October
21:45
23:00
23:01
23:30
02:00
08:00
09:00
09:00
09:00
09:30
09:30
17:00
New Zealand: Card spending, % m/m

New Zealand: House prices, % y/y
UK: BRC shop price index
Australia: Consumer confidence, % m/m
Japan: 10y JGBi Auction
Holland: 5y DSL Tap
Indonesia: 3m/1y Bills auction
Indonesia: 5y/15y/20y/30y Bonds auction
Greece: 26-week t-bill
Germany: OBLi Auction
UK: 2019 Linker Auction
US: 3y Note Auction
Wednesday 09 October
14:00
17:45
18:00
22:00
07:00
08:30
08:30
08:30
09:00
10:00
12:00
13:00
14:00
21:00
21:30
23:50
23:50
23:50
09:30
17:00
Sep
Sep
Sep
Oct
Period
Prev -3
Prev -2
Prev -1
1.3
7.6
-0.2
0.0
0.4
8.1
-0.5
3.5
0.4
8.5
-0.5
4.7
Prev -3
Prev -2
Prev -1
Forecast Consensus
-
Germany: 5y OBL Auction

US: 10y Note Auction
Period
Prev -3
Prev -2
Prev -1
0.4
200 bn
2.5 bn
1 bn
1 bn
1.75 bn
$ 30 bn
Forecast Consensus
Brazil: Selic overnight rate, %

Oct
8.00
8.50
9.00
9.50
US: Chicago Fed President Evans (FOMC voter) speaks in Washington
E17: ECB Executive Board members Cur speaks on "Economic Consequences of Low Interest Rates" in Geneva
US: Minutes of FOMC meeting released
Sep 17-18
E17: ECB President Draghi speaks at Harvard Kennedy School in Cambridge, USA
Czech: CPI, % y/y
Sep
1.6
1.4
1.3
1.2
UK: Industrial output, % m/m (y/y)
Aug
0.0 (-2.3)
1.3 (1.4) 0.0 (-1.6) 0.1 (-1.0)
UK: Manufacturing output, % m/m (y/y)
Aug
-0.7 (-2.9)
2.0 (2.1) 0.2 (-0.7)
0.2 (0.8)
UK: Visible trade balance, bn
Aug
-8.8
-8.2
-9.9
-9
Greece: HICP, % y/y
Sep
-0.3
-0.5
-1.0 2.6 (-0.9)
Germany: Industrial production, % m/m (y/y)
Aug
-1.2 (-1.2)
2.0 (0.1) -1.7 (-2.2) 2.0 (-0.4)
Brazil: IPCA inflation, % m/m
Sep
0.26
0.03
0.24
0.36
Mexico: CPI, % m/m
Sep
-0.06
-0.03
0.28
US: Wholesale inventories, % m/m
Aug
-0.6
-0.2
0.1
0.2
New Zealand: ANZ truckometer, % m/m
Sep
-8.0
10.0
-1.5
New Zealand: Business PMI, index
Sep
55.2
59.5
57.5
Japan: Index of tertiary industry activity, % m/m
Aug
1.2
-0.5
-0.4
0.3
Japan: Core machinery orders, % m/m
Aug
10.5
-2.7
0.0
4.2
Japan: Bank lending, including shinkin, % y/y
Sep
1.9
2.0
2.0
1.9
Thursday 10 October
01:00
08:00
11:00
11:00
13:45
16:20
17:45
18:30
19:00
23:00
00:00
00:30
00:30
Period
9.50
1.2
0.4 (-0.7)
0.4 (1.0)
-8.8
1.0 (-1.4)
0.33
0.46
0.3
0.4
2.5
4 bn
$ 21 bn
Forecast Consensus
Global: IMF/World Bank annual meeting (to 13/10)

G20: G20 Meeting in Washington (to 11/10)
Korea: South Korea 7-day Repo rate, %
Oct
2.50
2.50
2.50
2.50
E17: ECB publishes monthly bulletin
Oct
UK: BoE Bank rate decision, %
Oct
0.50
0.50
0.50
0.50
UK: BoE asset purchase decision, bn
Oct
375
375
375
375
US: St. Louis Fed President Bullard (FOMC voter) speaks in Missouri
E17: ECB President Draghi speaks at Economic Club of New York, USA
US: Fed Governor Tarullo (FOMC voter) speaks in Washington
US: San Francisco Fed President Williams (FOMC non-voter) speaks in Idaho
E17: ECB Executive Board member Asmussen speaks on " The End of the Crisis - Euro Vision?" in Washington, USA
Peru: Reference rate, %
Oct
4.25
4.25
4.25
4.25
China: Foreign reserves, USD bn (to 15/10)
Sep
3534.5
3514.8
3496.7
China: New loans, CNY bn (to 15/10)
Sep
860.5
699.9
711.3
675
China: M2 growth, % y/y (to 15/10)
Sep
14.0
14.5
14.7
14.0
India: Exports, % y/y (to 15/10)
Sep
-4.6
11.6
13.0
Egypt: CPI, % y/y
Sep
9.8
10.3
9.7
10.1
Australia: Inflation expectations, % m/m
Oct
2.6
2.3
1.5
Australia: Employment change, k
Sep
8.5
-11.4
-10.8
30.0
Australia: Unemployment rate, %
Sep
5.7
5.7
5.8
5.8
2.50
0.50
375
3520.0
658.6
14.0
15.0
5.8
4 October 2013

Thursday 10 October
00:30
01:00
04:01
06:45
07:00
07:00
07:30
07:30
07:30
07:30
07:30
08:00
08:00
08:00
09:00
10:00
10:00
12:30
12:30
12:30
12:30
18:00
21:45
23:50
23:50
02:00
09:00
17:00
Australia: Participation rate, %

Philippines: Total exports, % y/y
Malaysia: Industrial production, % y/y
France: Industrial production, % m/m (y/y)
Romania: CPI, % y/y
Denmark: CPI, headline, % m/m (y/y)
Sweden: CPI Headline, % m/m (y/y)
Sweden: CPIF, % m/m (y/y)
Sweden: CPI, index level
Sweden: Industrial production, % m/m (y/y)
Netherlands: HICP, % m/m (y/y)
Italy: Industrial production, % m/m (y/y)
Norway: CPI, headline, % m/m (y/y)
Norway: CPI-ATE, underlying, % m/m (y/y)
Greece: Unemployment rate, %
Portugal: HICP, % m/m (y/y)
Ireland: HICP, % m/m (y/y)
Canada: New house price index, % m/m (y/y)
US: Initial jobless claims, thous (4wma)
US: Import prices, % m/m (y/y)
US: Non-petroleum import prices, % m/m (y/y)
US: Treasury budget balance, $ bn (to 16/10)
New Zealand: Food prices, % m/m
Japan: M2/M3, % y/y
Japan: Corporate goods price index, % y/y
Japan: 30y JGB Auction
Italy: 12m BOT
US: 30y Bond Auction
Friday 11 October
15:00
06:00
06:00
06:00
07:00
07:00
08:00
08:00
12:00
12:30
12:30
12:30
12:30
12:30
12:30
12:30
12:30
13:55
14:00
09:00
09:00
Period
Sep
Aug
Aug
Aug
Sep
Sep
Sep
Sep
Sep
Aug
Sep
Aug
Sep
Sep
Sep
Sep
Sep
Aug
04-Oct
Sep
Sep
Sep
Sep
Sep
Sep
Period
Prev -3
Prev -2
Prev -1
65.3
65.1
65.0
-0.8
4.1
2.3
3.3
3.7
7.6
-0.4 (0.8) -1.4 (-0.1) -0.6 (-1.8)
5.4
4.4
3.7
-0.1 (0.9) -0.3 (0.6)
0.1 (0.4)
-0.2 (-0.1) -0.1 (0.1)
0.1 (0.1)
-0.1 (0.9) -0.1 (1.2)
0.1 (1.2)
313.99
313.55
313.84
3.3 (-5.3) 0.7 (-3.7) 0.7 (-3.7)
-0.5 (3.2)
0.4 (3.1) -0.2 (2.8)
0.1 (-4.4) 0.2 (-2.7) -1.1 (-4.3)
-0.4 (2.1)
0.4 (3.0) -0.1 (3.2)
-0.3 (1.4)
0.4 (1.8) -0.1 (2.5)
27.1
27.6
27.9
0.1 (1.2) -0.2 (0.8) -0.7 (0.2)
0.1 (0.7) -0.1 (0.7)
0.1 (0.0)
0.1 (1.8)
0.2 (1.8)
0.2 (1.9)
310 (315) 307 (309) 308 (305)
-0.4 (0.1)
0.1 (0.9) 0.0 (-0.4)
-0.3 (-0.2) -0.6 (-0.7) -0.2 (-1.0)
-34.6 ('10) -62.8 ('11) 75.2 ('12)
2.1
0.5
-0.5
3.8/3.0
3.7/3.0
3.7/3.0
1.2
2.3
2.4
Prev -3
Prev -2
Prev -1
E17: ECB Executive Board members Praet, Cur and Asmussen speaks at IIF in Washington, USA
US: Fed Governor Powell (FOMC voter) speaks in Washington
Serbia: HICP, % y/y
Sep
9.8
8.6
7.3
Costa Rica: Econ. activity index, % y/y
Aug
2.2
2.7
3.0
Germany: Final HICP, % m/m (y/y)
Sep
0.4 (1.9)
0.0 (1.6) 0.0 (1.6) P
Germany: Final CPI, % m/m (y/y)
Sep
0.5 (1.9)
0.0 (1.5) 0.0 (1.4) P
Sweden: Unemployment rate (PES), %
Sep
4.4
4.7
4.8
Hungary: CPI, % y/y
Sep
1.9
1.8
1.3
Spain: Final HICP, % y/y
Sep
-1.1 (1.9)
0.2 (1.6) (0.5) P
Italy: Final HICP, % m/m (y/y)
Sep
-1.8 (1.2)
0.0 (1.2) 1.8 (0.9) P
Italy: Final CPI, % m/m (y/y)
Sep
0.1 (1.2)
0.4 (1.2) -0.3 (0.9) P
India: Industrial production, % y/y
Aug
-2.8
-1.8
2.6
Canada: Unemployment rate, %
Sep
7.1
7.2
7.1
Canada: Net change in employment, k
Sep
-0.4
-39.4
59.2
Canada: Participation Rate, %
Sep
66.7
66.5
66.6
US: PPI, % m/m (y/y)
Sep
0.8 (2.5)
0.0 (2.1)
0.3 (1.4)
US: Core PPI, % m/m (y/y)
Sep
0.2 (1.7)
0.1 (1.2)
0.0 (1.1)
US: Retail sales, % m/m
Sep
0.7
0.4
0.2
US: Retail sales ex autos, % m/m
Sep
0.2
0.6
0.1
US: Core retail sales, % m/m
Sep
0.2
0.5
0.2
US: Michigan consumer sentiment-p index
Oct
85.1
82.1
77.5
US: Business inventories, % m/m
Aug
-0.1
0.1
0.4
Italy: BTP Auctions
Italy: CCT Auction
Forecast Consensus
14.0
5.7
0.5 (-2.9)
2.0
0.6 (0.3)
0.6 (1.1)
315.24
0.2 (2.5)
0.5
0.9 (3.2)
0.9 (2.2)
0.2 (0.0)
0.0 (0.1)
310 (309)
0.2
0.0
100.0
3.7/3.0
2.1
65.0
18.1
5.9
0.6 (-2.6)
2.2
0.3 (0.4)
0.5 (0.2)
0.6 (1.1)
315.16
0.6 (-4.1)
0.4 (2.7)
0.7 (-4.3)
0.9 (3.1)
0.9 (2.2)
307
0.3
60.0
3.7/3.0
2.3
700 bn
8 bn
$ 13 bn
Forecast Consensus
5.7
0.0 (1.6)
0.0 (1.4)
1.2
0.8 (0.5)
1.8 (0.9)
-0.3 (0.9)
2.0
0.2
0.2
0.2
0.3
0.3
72.0
0.2
0.0 (1.6)
0.0 (1.4)
4.7
1.3
0.5 (0.5)
1.8 (0.9)
-0.3 (0.9)
7.1
15.0
0.2 (0.6)
0.1 (1.3)
0.2
0.4
0.5
77.0
0.3
5 bn
1.5 bn
4 October 2013
10

Saturday 12 October
-
China: Exports, % y/y

China: Imports, % y/y
Sunday 13 October
21:45 New Zealand: PSI, index
Monday 14 October
13:00
00:30
00:30
01:30
01:30
06:00
06:30
09:00
12:00
02:30
09:00
12:50
Sep
Sep
Period
Sep
Period
E17: Eurogroup meeting in Luxembourg

New Zealand: REINZ Housing price index, %m/m (to 18/1 Sep
Australia: Home loans, % m/m
Aug
Australia: Investment lending, % m/m
Aug
China: CPI, % y/y
Sep
China: PPI, % y/y
Sep
Finland: HICP, % m/m (y/y)
Sep
India: WPI, % y/y
Sep
E17: Industrial production, % m/m (y/y)
Aug
India: CPI, % y/y
Sep
Korea: 5y Bonds auction
Germany: 6M Bubill
France: BTF auction
Tuesday 15 October
00:30
07:00
13:00
00:30
06:45
06:45
06:45
08:30
08:30
08:30
08:30
08:30
08:30
08:30
09:00
09:00
12:00
12:30
13:00
13:00
15:30
19:00
21:45
23:30
08:30
09:00
09:30
Period
Period
Prev -3
Prev -2
Prev -1
-3.1
-0.8
5.1
10.9
7.2
7.0
Prev -3
Prev -2
Prev -1
55.1
58.2
53.2
Prev -3
Prev -2
Prev -1
Forecast Consensus
-0.5
2.1
2.6
2.4
-0.5
2.9
2.7
2.6
-2.3
-1.6
0.0 (2.5) -0.1 (2.0)
5.79
6.10
0.6 (-0.4) -1.5 (-2.1)
9.64
9.52
2.8
-1.4
0.6 (2.0)
- 0.5 (-2.2)
KRW 1850 bn
3 bn
7 bn
0.0
1.6
1.1
2.7
-2.7
-0.1 (2.3)
5.16
-0.4 (-1.9)
9.87
Prev -3
Prev -2
Ireland: Government presents 2014 Budget

Australia: RBA board minutes
Oct
E28: ECOFIN meeting in Luxembourg
Greece: PM Samaras speaks on "The necessity of Europe'' at European Parliament in Brussels
Peru: Economic activity index, % y/y
Aug
4.8
4.4
Australia: Vehicle sales, % m/m (% y/y)
Sep
3.6 (6.9) -3.6 (3.0)
France: HICP, % m/m (y/y)
Sep
0.2 (1.0) -0.3 (1.2)
France: CPI, % m/m (y/y)
Sep
0.2 (0.9) -0.3 (1.1)
France: CPI ex tobacco index
Sep
125.78
125.35
UK: CPI, % m/m (y/y)
Sep
-0.2 (2.9)
0.0 (2.8)
UK: RPI, % m/m (y/y)
Sep
-0.1 (3.3)
0.0 (3.1)
UK: RPIx, % m/m (y/y)
Sep
-0.1 (3.3)
0.0 (3.2)
UK: Input prices, % m/m (y/y)
Sep
0.2 (4.0)
1.2 (5.1)
UK: Output prices, % m/m (y/y)
Sep
0.1 (2.0)
0.2 (2.1)
UK: Core output prices, % m/m (y/y)
Sep
-0.1 (0.9)
0.1 (1.1)
Italy: General govt. debt, bn
Aug
2074.6
2075.1
E17: ZEW economic sentiment index
Oct
32.8
44.0
Germany: ZEW economic expectations index
Oct
36.3
42.0
Poland: CPI, % y/y
Sep
0.2
1.1
US: Empire State mfg index
Oct
9.5
8.2
Canada: Existing home sales, % m/m
Sep
3.3
0.2
Canada: Teranet/National Bank HP index
Sep
157.0
158.2
Israel: CPI, % y/y
Sep
2.0
2.2
Argentina: CPI, % m/m
Sep
0.8
0.9
New Zealand: CPI, % q/q
Q3
-0.2
0.4
Australia: Leading index, % m/m
Aug
-0.1
0.0
Spain: 6m & 12m Letras
Greece: 13-weeek
Belgium: 3m and 12m t-bill
Prev -1
4.5
0.8 (0.2)
0.5 (1.0)
0.5 (0.9)
125.90
0.4 (2.7)
0.5 (3.3)
0.5 (3.3)
-0.2 (2.8)
0.1 (1.6)
0.0 (1.0)
2072.9
58.6
49.6
1.1
6.3
2.8
159.1
1.3
0.8
0.2
0.6
Forecast Consensus
5.0
6.3
5.0
7.0
Forecast Consensus
-
Forecast Consensus
-0.3 (1.0)
-0.3 (0.8)
125.54
0.8
-
48.0
4 bn
1.25 bn
4 bn
4 October 2013
11

07:30
18:00
21:30
06:00
07:00
08:00
08:30
08:30
08:30
08:30
09:00
09:00
09:00
09:00
11:00
11:30
12:00
12:30
12:30
12:30
13:00
14:00
21:00
02:00
09:30
09:30
Prev -3
Prev -2
Prev -1
Thailand: Benchmark interest rate, %

Oct
2.50
US: Fed Beige Book report released
US: Kansas City Fed President George (FOMC voter) speaks in Oklahoma
E28: New car registrations, % y/y
Sep
-5.9
Slovakia: HICP, % m/m ( y/y)
Sep
0.2 (1.7)
Austria: HICP, % m/m (y/y)
Sep
-0.2 (2.2)
UK: ILO unemployment rate, %
Aug
7.8
UK: Claimant count unemployment, k
Sep
-29.4
UK: Average weekly earnings, % 3m/y
Aug
1.8
UK: Core average earnings, % 3m/y
Aug
1.0
E17: Final HICP, % m/m (y/y)
Sep
-0.5 (1.6)
E17: 'Eurostat' core (HICP x fd, alc, tob, ene), % m/m (y/y)Sep
-0.9 (1.1)
E17: HICP ex tobacco, index (2005 = 100)
Sep
117.07
E17: Trade balance sa, bn
Aug
13.5
Brazil: IGP-10 inflation, % m/m
Oct
0.43
Brazil: Economic activity index, % y/y
Aug
2.3
Poland: Core inflation, % y/y
Sep
0.9
US: CPI, % m/m (y/y)
Sep
0.5 (1.8)
US: Core CPI, % m/m (y/y)
Sep
0.2 (1.6)
US: CPI, NSA index
Sep
233.504
US: Net long-term TIC flows, $ bn
Aug
-25.2
US: NAHB housing market index
Oct
56
New Zealand: ANZ job ads, % m/m
Q1
0.3
Japan: 5y JGB Auction
Portugal: 3m & 9m t-bills
Germany: 2y Schatz Auction
2.50
2.50
5.0
-0.1 (1.6)
-0.6 (2.0)
7.8
-36.3
2.2
1.1
0.1 (1.3)
0.2 (1.1)
116.39
13.5
0.15
2.4
1.4
0.2 (2.0)
0.2 (1.7)
233.596
-67.0
58
4.0
-5.0
-0.2 (1.4)
0.2 (1.8)
7.7
-32.6
1.1
1.0
... (1.1) P
... (1.0) P
116.53
11.1
1.05
3.4
1.4
0.1 (1.5)
0.1 (1.8)
233.877
31.1
58
-1.4
0.3 (1.4)
0.7 (1.6)
0.5 (1.1)
0.7 (1.0)
117.09
-
Prev -2
Prev -1
Serbia: Repo rate, %

Oct
11.00
11.00
US: Dallas Fed President Fisher (FOMC non-voter) speaks in New York
US: Chicago Fed President Evans (FOMC voter) speaks in Wisconsin
US: Kansas City Fed President George (FOMC voter) speaks in Oklahoma
US: Minneapolis Fed President Kocherlakota (FOMC non-voter) speaks in Montana
Chile: Overnight rate target, %
Oct
5.00
5.00
New Zealand: Consumer confidence, % m/m
Oct
-3.3
2.7
Australia: NAB business confidence, index
Q3
-6
2
Australia: Imports of goods, % m/m
Sep
Singapore: Non-oil domestic exports, % y/y
Sep
-9.4
-1.9
Sweden: Unemployment rate (sa), %
Sep
9.1 (7.9)
7.2 (7.8)
E17: ECB current account sa, bn
Aug
20.0
19.8
UK: Retail sales, % m/m (y/y)
Sep
0.2 (1.9)
1.2 (3.0)
UK: Retail sales exl. fuel, % m/m (y/y)
Sep
0.2 (1.9)
1.2 (3.2)
E17: Construction output, % m/m (y/y)
Aug
0.8 (-3.7) 0.9 (-2.7)
US: Initial jobless claims, thous (4wma)
11-Oct
307 (309) 308 (305)
US: Housing starts, thous saar
Sep
835
883
US: Building permits, thous saar
Sep
918
954
US: Industrial production, % m/m
Sep
0.1
-0.3
US: Capacity utilization, %
Sep
77.8
77.6
Philadelphia Fed mfg index
Oct
19.8
9.3
Spain: SPGB Auctions
France: OAT Auctions
France: OATi /ei Auctions
11.00
5.00
-3.4
-1
-6.2
7.3 (8.0)
16.9
-0.9 (2.1)
-1.0 (2.3)
0.3 (-1.2)
...
891
926
0.4
77.8
22.3
5.00
3.5 bn
8.5 bn
1.5 bn
Thursday 17 October
11:45
16:45
16:45
18:45
21:00
00:00
00:30
00:30
00:30
07:30
08:00
08:30
08:30
09:00
12:30
12:30
12:30
13:15
13:15
14:00
08:30
08:50
09:50
Period
Period
Prev -3
Forecast Consensus
-
0.3 (1.1)
2600 bn
1.25-1.5 bn
5 bn
Forecast Consensus
4 October 2013
12

Friday 18 October
00:10
01:00
18:00
02:00
02:00
02:00
02:00
07:30
12:00
12:30
12:30
12:30
13:00
14:00
19:00
02:00
Period
Prev -3
Prev -2
Prev -1
Australia: RBA Head of Financial Stability Ellis speaks on capital market dysfunctionality in Sydney
Australia: RBA Gov. Stevens speaks on The UK and Australia: Shared history, shared outlook in Sydney
US: Chicago Fed President Evans (FOMC voter) speaks in Illinois
China: GDP, % y/y
Q3
7.9
7.7
7.5
China: Industrial production, % y/y
Sep
8.9
9.7
10.4
China: Fixed asset investments, YTD % y/y
Sep
20.1
20.1
20.3
China: Retail sales, % y/y
Sep
13.3
13.2
13.4
-33.0
Netherlands: Consumer confidence index
Oct
-38.0
-33.0
Brazil: IPCA-15 inflation, % m/m
Canada: CPI, % m/m (y/y)
Canada: Core CPI, % m/m (y/y)
Canada: CPI, NSA index
Belgium: Consumer confidence index
US: Leading indicators index, % m/m
Argentina: Economic activity index, % y/y
Japan: Liquidity Enhancement Auction
Oct
Sep
Sep
Sep
Oct
Sep
Aug
0.07
0.2 (1.2)
0.2 (1.3)
123.0
-16.0
0.0
9.3
0.16
0.1 (1.3)
0.1 (1.4)
123.1
-12.0
0.5
6.9
0.27
0.1 (1.1)
0.0 (1.3)
123.1
-7.0
0.7
5.1
Forecast Consensus
7.7
10.3
20.3
13.4
300 bn
4 October 2013
13
GLOBAL KEY EVENTS

Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14
Forthcoming central bank announcement dates
North America
FOMC meeting
30
FOMC minutes
20
Fed's Beige Book
16
Bank of Canada
23
Europe
ECB "policy" meeting
2
7
ECB monthly bulletin
9
14
ECB "non-policy" meeting
17
21
Bank of England
9-10
6-7
BoE Inflation Report
13
BoE minutes
23
20
Riksbank
24
6
SNB
Norges Bank
24
Asia/RoW
Bank of Japan
03-04,31 20-21
BoJ minutes
9
6,26
Reserve Bank of Australia
1
5
RBNZ
31
Key international meetings
IMF/IBRD
10-13
EU Summit
24-25
ECOFIN
15
12
G20
10-11
G8
Elections
27
Argentina (Legislative)
Belgium (Parliamentary)
17
Chile (Presidential)
Colombia (Presidential)
Czech Republic (Parliamentary) 25-26
European (Parliamentary)
Egypt (Presidential)
Hungary (Parliamentary)
India (Parliamentary)
Indonesia (Parliamentary)
Indonesia (Presidential)
Iraq (General)
Isreal (Presidential)
20
Luxembourg (Parliamentary)
South Africa (General)
Sweden (General)
Turkey (Municipal)
Turkey (Presidential)
-
Jul-14
Aug-14 Sep-14
18
4
4
29
22
19
5
30
16
18
4
30
16
17
3
5
12
19
4-5
18
17
12
5
9
16
22
8-9
22
20
-
6
13
19
5-6
12
19
13
-
6
13
19
5-6
19
-
3
10
16
9-10
23
9
-
8
15
21
7-8
14
21
-
5
12
17
4-5
18
19
-
3
10
17
9-10
23
3
-
7
14
6-7
13
20
-
4
11
17
3-4
17
18
-
19-20
26
3
12
21-22
27
30
17-18
21
4
-
10
14
4
13
7-8,30
11
1
24
20-21
7,26
6
-
12-13
18
3
12
1
-
5
-
2
11
19-20
10
15-16
-
22-23
-
14-15
-
11-13
-
04-05
15*
-
Mar
Mar
-
Apr
9
Q2
-
25
25
22-25
May
#
May
-
15*
Jun
Jun
Jul
-
14
-
Note: *Second round, ** Due by end-May, 2014

Sources: Central banks, IMF, European Commission, Reuters, Bloomberg, Market News, Barclays Research
4 October 2013
14
CRITICAL EVENTS CALENDAR FOR US, EURO AREA, JAPAN AND UK

Date
Country
Event
Likely outcome: Our assessment
VAT hike plan (from 5% to 8% in April 2014) likely to be approved

after 1 October release of BoJ Tankan
October, 2013
Oct
Japan
Decision on whether to go ahead with April

2014 VAT hike (tbc)
Oct
Estonia
Local elections
07-Oct
Luxembourg Parliament dissolved
07-08 Oct
Japan
PM Abe attends APEC meeting
09-10 Oct
UK
BoE Policy meeting
10-11 Oct
G20
G20 Meeting (Washington)
10-13 Oct
Global
IMF/World Bank annual meeting
11-Oct
Italy
5.0bn BTP Auctions
11-Oct
Italy
1.5bn CCT Auctions
14-Oct
Euro area
Eurogroup meeting (Luxembourg)
15-Oct
EU
ECOFIN meeting (Luxembourg)
15-Oct
Ireland
Government presents 2014 Budget
Mid Oct
Euro area
ECB communication on bank asset quality

review
Mid Oct
EU
Deadline for submitting 2014 draft budget

plans to the European commission
Mid Oct
Italy
Government presents Stability Law
We expect the government to present fiscal measures (worth up to

EUR5bn) to keep the general government budget deficit below 3.0%
of GDP this year
Mid Oct
US
Debt ceiling likely to be breached from midOctober
We expect the debt ceiling to be increased, but this event has been
used in the past as leverage to enact further deficit reduction
Mid Oct
Japan
Extraordinary Diet session convenes (TBA)
PM Abe calls this "the session for growth strategy implementation"
16-Oct
US
Fed's Beige Book
17-Oct
Spain
3.5bn SPGB Auctions
19-Oct
Italy
Appeal Court rules on the length of a public

office ban sentenced against former PM Silvio
Berlusconi in August
20-Oct
Luxembourg Parliamentary Elections
24-25 Oct
EU
EU Summit (Brussels)
28-Oct
Italy
1.0bn BTPei Auctions
28-Oct
Belgium
3.0bn 5y, 7y & 10y BGB Auctions
30-Oct
US
FOMC meeting
We do not expect tapering in the pace of asset purchases at this

meeting
31-Oct
Japan
BoJ MPM and semi-annual Outlook Report
Focus on revisions to FY 13-14 core CPI forecasts
EU
Deadline for the European commission to

adopt an opinion requesting a revised budget
plan in case of serious non-compliance with
the treaties.
End Oct
Various international meetings in Washington and the release of the

IMF's latest forecasts. Policymakers are likely to emphasise the need
for resolution in the US Congressional fiscal stand-off.
EU leaders will discuss progress toward a more integrated EMU, and

might discuss some EC proposals for more coordination of economic
policies
November, 2013
05-Nov
EU
EC to publish autumn forecasts (by end of

November the latest)
06-07 Nov UK
BoE Policy meeting
07-Nov
Euro area
ECB Governing Council meeting
11-Nov
Euro area
Eurogroup meeting (Brussels)
12-Nov
EU
ECOFIN meeting (Brussels)
4 October 2013
15

Date
Country
Event
13-Nov
UK
BoE Inflation report
Mid Nov
EU
EC publishes the annual growth survey (by

end December the latest) and overall
assessment of budget plans (by end
November the latest)
20-21 Nov Japan
Likely outcome: Our assessment
BoJ monetary policy meeting
December, 2013
04-Dec
US
Fed's Beige Book
04-05 Dec UK
BoE Policy meeting
05-Dec
Euro area
ECB Governing Council meeting
09-Dec
Euro area
Eurogroup meeting (Brussels)
10-Dec
EU
ECOFIN meeting (Brussels)
15-16 Dec G20

18-Dec
US
G20 Meeting (Australia)

FOMC meeting
19-20 Dec EU
EU Summit (Brussels)
19-20 Dec Japan
BoJ monetary policy meeting
End Dec
Deadline for settling TPP negotiations
Japan
Note: All times are local. Source: Barclays Research
4 October 2013
16
DATA REVIEW & PREVIEW: EURO AREA

Philippe Gudin, Francois Cabau, Antonio Garcia Pascual, Fabio Fois, Thomas Harjes, Fabrice Montagne, Apolline Menut
Review of last weeks data releases
Main indicators
Period
Previous
Barclays
Actual
Sep
1.3
1.1
1.1
Inflation dropped; in line with our below-consensus
E17: "Flash" HICP, % y/y
Comments
E17: Final manufacturing PMI, index
Sep
51.1 P
51.1
51.1
Final manufacturing PMIs: fragile recovery confirmed
Italy: Unemployment rate, %
Aug
12.1 R
12.2
Labour market dynamics unfold in line with our

expectations
E17: Unemployment rate, %
Aug
12.0 R
12.1
12.0
Unemployment down for a third month in a row
E17: ECB Interest rate announcement, %
Oct
0.50
0.50
0.50
Avoiding liquidity accidents
E17: Final composite PMI, index
Sep
52.1 P
52.1
52.2
In line with our 0.2% q/q Q3 GDP forecast
E17: Retail sales, % m/m (y/y)
Aug
0.5 (-0.7) R
0.7 (-0.3) Upside risks to our Q3 private consumption forecast
Preview of week ahead

Monday 07 October
Period
Prev - 3
Prev - 2
Luxembourg: Parliament dissolved
09:30
E17: ECB Executive Board member Asmussen speaks on "Markets in Transition" in Germany
11:15
E17: ECB Executive Board member Praet speaks on Japanese economy in Brussels
08:00
Norway: Manufacturing production, % m/m (y/y)
Tuesday 08 October
Prev - 1
Forecast
Consensus
Aug
-1.7 (2.8)
2.9 (6.1)
0.1 (5.7)
-0.1
Period
Prev - 3
Prev - 2
Prev - 1
Forecast
Consensus
05:45
Swi: Unemployment rate (adj), %
Sep
3.2
3.2
3.2
3.2
06:00
Germany: Trade balance sa, bn
Aug
13.6
17.0
16.1
15.0
06:30
France: BdF industrial business sentiment, index
Sep
96.4
94.9
96.5
06:45
France: Trade balance, bn
Aug
-5.8
-4.5
-5.1
-4.8
06:45
France: Budget, year-to date, bn
Aug
-72.6
-59.3
-80.8
07:00
Spain: Industrial production (wda), % y/y
Aug
-1.5
-2.2
-1.4
-0.3
07:15
Swi: CPI, % m/m (y/y)
Sep
0.1 (-0.1)
-0.4 (0.0)
-0.1 (0.0)
0.2 (-0.1)
07:15
Swi: Retail sales, % y/y
Aug
1.5
2.3
0.8
1.0
10:00
Germany: Factory orders, %m/m (y/y)
Aug
-0.5 (-1.8)
5.0 (5.6)
-2.7 (2.0)
1.0(4.1)
1.0 (4.0)
Germany Factory orders: We expect industrial orders to move further along their upward trend, as foreshadowed by strong
VDMA machinery orders for August.
17:45
Period
Prev - 3
Prev - 2
Prev - 1
Forecast
Consensus
E17: ECB Executive Board members Cur speaks on "Economic Consequences of Low Interest Rates" in Geneva
22:00
E17: ECB President Draghi speaks at Harvard Kennedy School in Cambridge, USA
09:00
Greece: HICP, % y/y
Sep
-0.3
-0.5
-1.0
2.6 (-0.9)
10:00
Germany: Industrial production, % m/m (y/y)
Aug
-1.2 (-1.2)
2.0 (0.1)
-1.7 (-2.2)
2.0 (-0.4)
1.0 (-1.4)
Germany Industrial production: We expect industrial production to bounce back after the July drop, displaying high volatility
during the holiday season.
Thursday 10 October
Period
Prev - 3
Global: IMF/World Bank annual meeting (to 13/10)
G20: G20 Meeting in Washington (to 11/10)
08:00
E17: ECB publishes monthly bulletin
16:20
E17: ECB President Draghi speaks at Economic Club of New York, USA
Prev - 2
Prev - 1
Forecast
Consensus
Oct
19:00
E17: ECB Executive Board member Asmussen speaks on
" The End of the Crisis - Euro Vision?" in Washington, USA
06:45
France: Industrial production, % m/m (y/y)
Aug
-0.4 (0.8)
-1.4 (-0.1)
-0.6 (-1.8)
0.5
07:00
Denmark: CPI, headline, % m/m (y/y)
Sep
-0.1 (0.9)
-0.3 (0.6)
0.1 (0.4)
0.3 (0.4)
07:30
Sweden: CPI Headline, % m/m (y/y)
Sep
-0.2 (-0.1)
-0.1 (0.1)
0.1 (0.1)
0.6 (0.3)
0.5 (0.2)
4 October 2013
0.6 (-2.6)
17

Period
Prev - 3
Prev - 2
Prev - 1
Forecast
Consensus
07:30
Thursday 10 October (continued)

Sweden: CPIF, % m/m (y/y)
Sep
-0.1 (0.9)
-0.1 (1.2)
0.1 (1.2)
0.6 (1.1)
0.6 (1.1)
07:30
Sweden: CPI, index level
Sep
313.99
313.55
313.84
315.24
315.16
07:30
Sweden: Industrial production, % m/m (y/y)
Aug
3.3 (-5.3)
0.7 (-3.7)
0.7 (-3.7)
0.6 (-4.1)
07:30
Netherlands: HICP, % m/m (y/y)
Sep
-0.5 (3.2)
0.4 (3.1)
-0.2 (2.8)
0.2 (2.5)
0.4 (2.7)
08:00
Italy: Industrial production, % m/m (y/y)
Aug
0.1 (-4.4)
0.2 (-2.7)
-1.1 (-4.3)
0.5
0.7 (-4.3)
08:00
Norway: CPI, headline, % m/m (y/y)
Sep
-0.4 (2.1)
0.4 (3.0)
-0.1 (3.2)
0.9 (3.2)
0.9 (3.1)
08:00
Norway: CPI-ATE, underlying, % m/m (y/y)
Sep
-0.3 (1.4)
0.4 (1.8)
-0.1 (2.5)
0.9 (2.2)
0.9 (2.2)
09:00
Greece: Unemployment rate, %
Sep
27.1
27.6
27.9
10:00
Portugal: HICP, % m/m (y/y)
Sep
0.1 (1.2)
-0.2 (0.8)
-0.7 (0.2)
0.2 (0.0)
10:00
Ireland: HICP, % m/m (y/y)
Sep
0.1 (0.7)
-0.1 (0.7)
0.1 (0.0)
0.0 (0.1)
G20 G20 meeting: Various international meetings in Washington and the release of the IMF's latest forecasts. Policymakers are
likely to emphasise the need for resolution to the US Congressional fiscal stand-off.
France Industrial production: We expect August French IP to make up some of Julys fall by increasing by about 0.5% m/m
(-2.9% y/y) on stronger manufacturing and energy production. Carry over into Q3 would still be quite low at -1.4% q/q (after
+1.4% in Q2). This is consistent with an ongoing gradual improvement across the board, as well as in line with our forecast of flat
GDP in Q3 after +0.5% growth in Q2.
Sweden Inflation report: We expect both headline and the Riksbanks preferred inflation measure CPIF to increase 0.6% m/m
in September brining inflation to 0.3% y/y and 1.1% y/y, respectively. We expect these increases primarily to be driven by
seasonal price hikes on clothing and footwear. This is slightly higher than the Riksbanks latest estimate (CPI 0.23% y/y; CPIF
1.05% y/y).
Italy Industrial production: We expect Italian IP to have increased 0.5% m/m in August, after declining 1.1% m/m in July.
Consistent with our expectation that industrial output declined 0.6% q/q in the third quarter of the year, we continue to forecast
flat GDP growth in Q3.
Norway Inflation report: We expect both headline and core inflation to increase by 0.9% m/m, bringing the inflation rate to
3.4% and 2.2%, respectively. While we expect the recent spike in core-inflation to prove partly temporary, we still see some
upside risks to the Norges Bank' latest forecast (Q3 2.1%).
Friday 11 October
Period
Prev - 3
Prev - 2
Prev - 1
Forecast
Consensus
E17: ECB Executive Board members Praet, Cur and Asmussen speaks at IIF in Washington, DC
06:00
Germany: Final HICP, % m/m (y/y)
Sep
0.4 (1.9)
0.0 (1.6)
0.0 (1.6) P
0.0 (1.6)
0.0 (1.6)
06:00
Germany: Final CPI, % m/m (y/y)
Sep
0.5 (1.9)
0.0 (1.5)
0.0 (1.4) P
0.0 (1.4)
0.0 (1.4)
06:00
Sweden: Unemployment rate (PES), %
Sep
4.4
4.7
4.8
4.7
07:00
Spain: Final HICP, % m/m (y/y)
Sep
-1.1 (1.9)
0.2 (1.6)
(0.5) P
0.8 (0.5)
0.5 (0.5)
08:00
Italy: Final HICP, % m/m (y/y)
Sep
-1.8 (1.2)
0.0 (1.2)
1.8 (0.9) P
1.8 (0.9)
1.8 (0.9)
08:00
Italy: Final CPI, % m/m (y/y)
Sep
0.1 (1.2)
0.4 (1.2)
-0.3 (0.9) P
-0.3 (0.9)
-0.3 (0.9)
4 October 2013
18
DATA REVIEW & PREVIEW: UNITED KINGDOM

Blerina Urui
Review of last weeks data releases
Main Indicators
Period Previous
Barclays
Actual
Consumer credit, bn
Aug
0.6
0.6
0.6
Mortgage lending, bn
Aug
0.8 R
1.0
1.0
Mortgage approvals, k
Aug
60.9 R
61.5
62.2
M4 money supply, % m/m
Aug
0.6
0.7
Manufacturing PMI, index
Sep
57.1 R
58.0
56.7
Headline activity expanded at a slower pace
Construction PMI
Sep
59.1
60.0
58.9
Construction PMI was broadly unchanged
Services PMI
Sep
60.5
61.0
60.3
Services PMI consistent with a solid pace of

expansion
0.3 R (5.4)
0.3 (6.2)
House prices increased for the eight consecutive month
Halifax house price index, % m/m (3m/y) Sep
Comments
Both secured and unsecured lending increased as
expected while mortgage approvals rose to their
highest since Feb 2008, paving the way for a further
pick-up in mortgage lending.
Preview of the next week

Monday 07 October
Period
Prev - 3
Prev - 2
Prev -1
Forecast
Consensus
Period
Prev - 3
Prev - 2
Prev -1
Forecast
Consensus
00:01 BRC total sales, % y/y
Sep
2.9
3.9
3.6
00:01 RICS house price balance
Sep
22
37
40
40
42
There are no significant data releases scheduled
Tuesday 08 October
RICS house prices: We expect the September RICS house price balance to remain unchanged at a seven-year high of 40, confirming the
recent pick-up observed in housing activity as indicated by other housing market data from the likes of Nationwide and Halifax.
Period
Prev - 3
Prev - 2
Prev -1
Forecast
Consensus
00:01 BRC shop price index
Sep
-0.2
-0.5
-0.5
09:30 Industrial output, % m/m (y/y)
Aug
0.0 (-2.3)
1.3 (1.4)
0.0 (-1.6)
0.1 (-1.0)
0.4 (-0.7)
09:30 Manufacturing output, % m/m (y/y)
Aug
-0.7 (-2.9)
2.0 (2.1)
0.2 (-0.7)
0.2 (0.8)
0.4 (1.0)
09:30 Visible trade balance, bn
Aug
-8.8
-8.2
-9.9
-9.0
-8.8
Industrial production: We forecast the August manufacturing production to increase by 0.2% m/m, consistent with the recovery
seen in manufacturing PMI data recently. While mining and quarrying is expected to contract, the utilities component is likely to
post a healthy gain. Overall, we expect industrial production to increase marginally by 0.1% m/m.
Visible trade balance: We expect the August visible trade deficit to narrow slightly to 9.0bn, owing to a slight improvement in
trade with Non-EU countries. Nevertheless, the UK's external position remains weak.
Thursday 10 October
Period
Prev - 3
Prev - 2
Prev -1
Forecast
Consensus
12:00 BoE Bank rate decision, %
Oct
0.50
0.50
0.50
0.50
0.50
12:00 BoE asset purchase decision, bn
Oct
375
375
375
375
375
BoE interest rate announcement: We expect the BoE's MPC to keep its policy on hold with Bank rate at 0.50% and asset
purchases at 375bn. The recent pick up in activity indicators is unlikely to motivate the MPC to change its course of action given
that inflation remains above target and the labour market situation continues to be fragile.
Friday 11 October
Period
Prev - 3
Prev - 2
Prev -1
Forecast
Consensus
There are no significant data releases scheduled
4 October 2013
19
EURO AREA RATES STRATEGY
EUR long end and UFR committee proposal

Cagdas Aksu
+44 (0)20 7773 5788
cagdas.aksu@barclays.com
We think the proposed UFR committee changes might help to make the EUR 10s/30s curve
slightly more resilient to a US-led potential flattening of the 10s/30s developed market
curves. However, we would not chase the 10s/30s steepening, even if carry is still attractive.
This week Ultimate Forward Rate (UFR) committee, which was asked by The Dutch State
Secretary of Social Affairs to assess and recommend possible adjustments on the existing
UFR framework (DNB UFR), announced its recommendations after also taking into account
feedback from 18 domestic and international market participants. Our understanding of the
committees overall recommendations are summarised below.
1. The UFR level will move from a fixed number (4.2%) to a 10y moving average of the
1y20y forward rate, which was about 3.90% as at end of July.
2. The committee sees the start point of the UFR method, 20y, as a First Smoothing Point
(FSP) instead of a Last Liquid Point (LLP). This is mostly a definitional change.
3. In the existing DNB UFR, fixed UFR (4.20%) is reached at the 60y point. Under the new
committee UFR (CUFR), forward rates eventually converge towards the UFR level
(around 50y) but never actually reach it. Similarly to the modified version of the UFR
that was agreed in September last year (ie the existing DNB UFR), the calculation of 20y+
discount factors still include some form of market forwards in that part of the curve,
which was a shortcoming of the original version of the UFR in summer 2012
(see Opportunities in the EUR long end with a modified UFR framework).
4. The committee estimates that the funding ratio for an average Dutch pension fund rises by
1.1% and that contributions decline very slightly 1 compared with the existing methodology
as of July 31. Also, the relative changes in the funding ratio under CUFR vs DNB UFR do not
always have to be in the same direction; a lower or higher trending yield environment is likely
to make a difference. However, overall, the relative changes are unlikely to be big.
FIGURE 1
In 2012, the EUR long end steepened significantly owing to
regulatory change, before flattening from spring 2013
FIGURE 2
but the 2012 steepening was also global due to extremely
accommodative monetary policies
40
150
EUR 10s/30s
30
125
EUR 30s/50s (RHS)
20
100
60
10
75
40
50
20
-10
-20
-20
-30
-40
-40
-60
-50
-80
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
-60
120
100
80
GBP 10s/30s
EUR 10s/30s
USD 10s/30s
25
0
-25
-50
-75
-100
Despite the fact that the UFR with the proposed changes is lower as of July 31, the funding ratio still improves. The
reason for this is largely that the exiting DNB UFR uses the average of the discount curve over the past three months
while CUFR uses the discount curve as of 31 July. And in the three months into end of July, rates sold off across the
board due to Fed tapering concerns.
4 October 2013
20

5. Importantly, under CUFR, the delta risk profile for an average pension fund does not
change massively vs the latest DNB UFR 2 either. There is some delta risk hedging shift
from the 40y, 30y, 25y points on the curve to the 20y point. However, still, the difference
in delta risk profile between CUFR and DNB UFR is nowhere near that between the
original summer 2012 version of the UFR (which had important shortcomings) and the
existing DNB UFR (ie the modified version of the original summer 2012 version).
Implications of the proposed changes

The proposed changes will likely
not be in place before 2015
DNB reported in a press release on 1 October 3 that none of these proposed changes will be
implemented in the 2014 transition year and that it will maintain the existing DNB UFR
framework. Therefore, even if funds wanted to act and make hedging changes on the back
of the Committees proposals, they are not likely to be in a rush. Despite not having the
English version of the full release for now, our initial take is that overall these proposed
changes are unlikely to lead to any substantial moves in the long end of the EUR yield curve,
unlike last year, for the reasons we outline below.
1. Last year in spring, when the discounting framework changes from a market-based to a
UFR approach started to be seriously considered by regulators, it represented an important
change for the market: it was the first time any concrete proposals had emerged despite
several years of discussions around this issue. Also, since then, ahead of the final UFR
framework was agreed by DNB in September/October 2012, many pension funds that
wanted to recalibrate themselves with the UFR discounting shifted their hedges from the
40/50y area to 20y area already. Therefore, the lack of timing urgency of the proposed
changes, relatively minor differences vs the DNB UFR, and the fact that most funds that
wanted to shift their hedges along the curve are largely done by now, will prevent a big
resteepening of the ultra long end curve in our view. However, owing to small shifts of
delta risk profile from the ultra long end to 20y in relative terms, the 20s/50s curve could
still see some marginal steepening.
2. Alongside the regulatory changes, another factor that pushed the EUR long end curve
significantly steeper in 2012 was the aggressively accommodative monetary policy
globally (eg Fed started QE3 etc), which saw long-end curves steepen further in all
developed markets. Since May this year, the Fed has been preparing to unwind these
policies, as a result of which the 10s/30s curves have re-flattened globally during the
summer before partially reversing this move since September. While the ECB still
remains dovish, it is generally reluctant to introduce new accommodative policies given
the recent improvement in economic data. More importantly, even if the ECB introduces
more accommodative measures, such as a refi rate cut, or even another LTRO, unless
the direction of US monetary policy changes from gradually-less-accommodation going
forward, we would expect the 10y+ parts of the EUR curve to remain vulnerable to a
flattening. Consequently, our preferred part of the EUR curve for steepening is between
the 2/3y and 10y.
3. Overall, we think the proposed changes might help to make the EUR 10s/30s curve
slightly more resilient to a potential US-led flattening of the 10s/30s developed market
curves going forward. While US rates have lost their bearish momentum somewhat after
the September FOMC meeting, future strong data could still change the picture in the
coming months, potentially leading to more flattening pressure in 10s/30s globally. As
such, just based on the proposed changes by the UFR committee, we would not chase
the 10s/30s steepening even if carry is still attractive (20bp) over a year.
The full details of the proposed changes is only available in Dutch at the moment at the following link:
http://www.rijksoverheid.nl/documenten-en-publicaties/kamerstukken/2013/10/01/kabinetsreactie-op-het-adviesvan-de-commissie-ultimate-forward-rate-ufr.html The delta risk profile chart can be seen on Figure 8 at page 54.
3
http://www.dnb.nl/en/news/news-and-archive/persberichten-2013/dnb297414.jsp
4 October 2013
21
FIGURE 3
US led outright market sell-off in the belly of the curve has
resulted in a flattening in 10y+
110
100
4.0
USD 10s/30s
FIGURE 4
Paying the belly on EUR 5y10y/5y15y/5y20 is still probably
a better carry trade than 10s/30s steepeners
160
10y USD swap (RHS)

3.5
90
30
EUR 5y10y/5y15y/5y20y
EUR 5y5y/15y15y (RHS)
110
-20
60
-70
10
-120
-40
-170
3.0
80
2.5
70
2.0
60
1.5
50
40
Jan-12
1.0
May-12
Sep-12
Jan-13
May-13
Sep-13
-90
Jan-08
-220
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
4. Given that potentially there might be somewhat more receiving appetite in the 20y
sector as a result of the changes, the RV carry trade structures that benefit from paying
the 20y sector might look initially less attractive. However, carry from paying the belly in
an RV trade like EUR 5y10y fwd/5y15y fwd/5y20y fwd is still 17.5bp over a year; and
the structure looks much lower than the levels implied from the steepness of the longend curve (we look at EUR 5y5y/15y15y fwd curve spread for this Figure 4). This latter
argument combined with our expectation that new hedging shifts will be much less
than last year based on the UFR committees proposed changes, we think picking up
17.5bp positive carry from paying EUR 5y10y fwd/5y15y fwd/5y20y fwd is still better
value than 20bp carry in 10s/30s steepeners over a year, considering the risk scenarios.
4 October 2013
22
MONEY MARKETS
Liquidity evolution under the ECBs attention

Giuseppe Maraffino
+44 (0)20 3134 9938
giuseppe.maraffino@barclays.com
Very little new information

about the outlook for
monetary policy from the ECBs
September meeting
We still see another LTRO as

more likely than a refi rate cut
Over the past month, euro short rates have declined, reflecting dovish Fed comments
and the ECBs suggestion of the possibility of another LTRO. We expect the 1y1y Eonia
forward to keep trading at 35-45bp.
The ECBs October meeting brought very little new information about the outlook for
monetary policy. As expected, the ECB left policy interest rates and forward guidance
unchanged. During the Q&A session, ECB President Draghi mentioned the LTRO (as he did
in his hearing at the EU Parliament on 23 September) as among the available instruments to
counteract any effect from tightening liquidity conditions on euro money market rates.
However, he did not provide any suggestion on the timing of the operation or on its
structure (eg, maturity, cost of borrowing, etc) 4. Asked how the ECB would avoid another
LTRO to cause an increase in banks government bond purchases, he said the ECB could
shape an LTRO the best possible way to respond to any needs. In particular, he explained
that collateral policies would be adapted to market developments and noted that the ECB
could envisage accepting ABS mezzanine tranches backed by SME loans as collateral.
The ECBs latest comments have not changed our view. Another interest rate cut remains
unlikely, in our opinion, unless economic activity takes a step back. Forward guidance is likely
to remain unchanged in the coming months, with the next step likely to be the removal of the
downward bias should the economic situation continue to improve. We continue to envisage
another very long-term refinancing operation (VLTRO), likely with different characteristics
(eg, fixed to the current benchmark rate, open-ended, with specific collateral) as the most
likely instrument for the ECB to use to address the tightening liquidity conditions should this
result in an increase in Eonia fixing (and consequently Eonia rates) volatility.
FIGURE 1
ECB meeting - Eonia forward curve: move over the last month
FIGURE 2
Tentative expectation on surplus and Eonia evolutions
1,200
1.75
03-Oct-13
1.50
05-Sep-13
1,000
Refi rate
1.25
200
Liq.Surp., eur bn, lhs

Exp. Liq. Surp., Eur bn, lhs
EONIA fix., bp
Exp. Eonia, bp
depo rate, bp
refi rate, bp
800
1.00
600
100
0.75
0.50
400
0.25
200
0.00
Sep-13
May-14
Dec-14
Aug-15
Apr-16
Dec-16
0
Jun-09
Jul-10
Sep-11
Oct-12
Dec-13
0
Feb-15
Note: Our prediction on the evolution of the liquidity surplus is based on: the
strong assumption of constant autonomous factors; full roll of existing ECB
liquidity operations; no further LTROs; unchanged policy rates; gradual
repayment of the 3y LTROs at an average of EUR3bn per week; and roll of
remaining 3y liquidity at maturity into the 3m LTRO.
Source: EBF, ECB, Barclays Research
The day after the October press conference, Bloomberg reported that ECB President Mario Draghi had tasked a
panel to study options for new bank funding measures aimed at dealing with any future liquidity shortages.
4 October 2013
23
Liquidity conditions and Eonia movements

The surplus is now close to
200bn, but Eonia fixing has
remained broadly unchanged
at 8bp
Over the past month, liquidity conditions have tightened moderately as the surplus has
declined 29bn to 216bn. The drop is due to the 21bn decline in OMO liquidity (due to 3y
LTROs repayments) and the 8bn increase in autonomous factors (that have been quite
volatile in the period). Even if the surplus has moved close to the psychological limit of
200bn, Eonia fixing has remained broadly unchanged at about 8bp (with the exception of
the spike on 30 September, mainly due to end-of-quarter effects).
German banks contribution to

the Eonia market
The significant drop in Eonia volume the day before the public holiday in Germany (3 October),
from 30bn to 12bn, has allowed us to estimate the contribution to Eonia volume by
German banks to approximately 18bn (more than half of the entire volume of the Eonia
reported market). Interestingly, despite the sharp drop in volume, the fixing (calculated as
the weighted average of the lending rates reported by panel banks) has remained
unchanged at 7.9bp. This suggests a very low dispersion among panel banks contributions.
Also, last year the changes in volumes were similar (drop from 25bn to 12bn the day
before the public holiday), but the effect on fixing was slightly more pronounced (-0.8bp to
8.7bp), suggesting that, on average, German banks contributions were greater than the
average of non-German banks contributions., This could also mean that over the past year,
non-German banks have probably increased their lending rates while German banks have
kept them broadly stable.
might be a factor favouring

the stability of Eonia fixing
German banks accounting for more than half of Eonia (reported) volume (also because the
contribution of other banks has declined) could be an important towards understanding the
relationship between Eonia and the liquidity surplus. At present, German banks ECB
borrowing amounts to a mere 10bn (they are a net lender to the ECB of about 96bn,
excluding the usage of 1-week term deposit, which at the end of August amounted to
73.4bn), suggesting less dependence on general Eurosystem liquidity conditions (their ECB
borrowing was much higher in the past). Therefore, German banks contributions to the
EONIA market should be less sensitive to movement of the liquidity surplus, although it is
not clear how German banks in the Eonia panel adjust their lending rates, especially to other
small German banks, and to which extent the weekly drain auctions rates are a reference
for them in terms of the lending rate in the overnight unsecured liquidity market. This, given
the relatively high volume reported by German banks, might imply a reduction in the fixings
sensitivity to the surplus, which would mean a more stable Eonia fixing even in a context of
the surplus moving well below 200bn.
Possibility of another LTRO has started to be priced in

Bull flattening since
mid-September
Market expectations of ECB actions have changed over the past month (Figure 1). The Eonia
curve has bull flattened since the ECB September meeting, when President Draghi warned
that the ECB was ready to act if further passive tightening of liquidity conditions emerged,
which could trigger an increase in EONIA fixing (at about 8bp at that time). Moreover, the
(unexpected) dovish message by the Fed at the September FOMC meeting and the fact that
President Draghi mentioned (for the first time ) the LTRO among the available instruments
to counteract passive tightening of liquidity conditions at his hearing at the EU Parliament
further support the decline in EU short rates. It is worth noting that the 1y1y Eonia forward
has rallied from the highest level since the allotment of the two 3y LTROs, 59bp, to the
current level of 36bp, in line with our expectations.
Flattening up to 2y tenors;
the curve remains steep
at longer maturities
Moreover, the term premium component embedded in money market rates has declined
but not disappeared (Figure 4). Indeed, looking at maturities beyond 2015, the bull
flattening was much less pronounced (Figure 3). This is because long maturities are much
more affected in general by major central banks expectations of a general increase in policy
rates (this part of the money market curve is more sensitive to moves in the US rates
market) and the normal term premium this far out in the money market curve, rather than a
4 October 2013
24

specific expectation of the ECBs policy rates. This has supported our view to maintain our
red/greens steepening exposures
Markets have postponed the
full normalisation of Eonia at
around the MRO rate; further
ECB actions are priced in the
curve now
The Eonia forward curve continues to price in gradual normalisation of the fixing within the
monetary policy corridor due to tightening liquidity conditions from 3y LTRO repayments.
However, while at the beginning of September fully normalisation of Eonia was priced in by
the end of December 2014, markets now expect this to happen in September 2015. More
specifically, for the March 2015 reserve period (just after the natural maturity of the two 3y
LTROs), EONIA fixing is priced at 33bp, which means no normalisation of EONIA (assuming
an unchanged refi rate at 50bp) and likely discounts some probability of liquidity being reinjected into the market, via an LTRO.
Another possible interpretation of the shape of the Eonia curve could be expectations of
Eonia normalisation to a lower refi rate (ie, expectation of a 25bp refi rate cut), in a context
of low excess liquidity (ie, no further liquidity operations), as EONIA fixing pricing at 25bp
for the November 2014 reserve period seems to suggest. However, such an interpretation
also suggests a change in the monetary policy stance in the first half of 2015, with the first
refi rate hike that seems fully priced by August 2015 (Eonia is priced at 51bp).
Since we believe it is unlikely the refi rate cut tool is used to address any issues related to
the possible increase in Eonia fixing owing to the decline in the liquidity surplus, we are
more confident in interpreting the current shape of the Eonia curve as the result of rising
expectations of other liquidity operations.
Trading recommendations
The very front end of the Eonia curve should remain driven by current and expected
Eurosystem liquidity conditions. As long as the decline in the surplus does not increase
volatility of the fixing, we do not expect any major move up to the 1y part of the curve. Post
1-year rates are likely to remain sensitive to more global factors. Concrete suggestions of
VLTRO would trigger a rally in short rates with a flattening of the money market curve up to
the 2- or 3-year tenors.
In general, with the ECB not adding new information to the markets, we continue to expect
a period of range trading, with the 1y1y Eonia forward at range 35-45bp. We maintain our
steepening exposure to golds/blues (1y3y forward vs 1y2y Eonia forward)
FIGURE 3
Long part of the Eonia curve has remained steep
FIGURE 4
Decomposition of the 3m Euribor: Spot and forward
1.6
70
1.4
1.2
60
Resulting 3m Euribor
market levels
1.0
50
0.8
0.6
40
0.4
0.2
30
0.0
20
10
0
Oct-12
-0.2
1y2y fwd vs 1y1y fwd

Dec-12
4 October 2013
Mar-13
Jun-13
Current ECB
OIS-ECB
Libor-OIS
Term premium
-0.4
-0.6
Sep-13
3m Euribor
3m 1y fwd
3m 2y fwd
3m 3y fwd
Source: Bloomberg, Barclays Research
25
SOVEREIGN SPREADS
Q4 and 2014-15 Supply Outlook

We forecast gross supply for the remainder of 2013 at c.168bn, resulting in total net
issuance of just under 48bn. We look for 2014 gross bond issuance in the euro area to
show a decrease of about 5bn, with total gross issuance forecast at 872bn.
Huw Worthington
+44 (0)20 7773 1307
huw.worthington@barclays.com
Including account issuance thus far in 2013, we forecast the Eurozones total issuance
requirements for the remainder of Q4 at c.168bn. We predict redemptions of c.120bn,
resulting in total net issuance of just over 45bn over the next three months. However, the
majority of net issuance needs will fall in November, when support from redemptions will be the
second-lowest of any month in 2013, resulting in November being the fourth- heaviest issuance
month of this year. The highly rated core will account for the bulk of net issuance, with Germany,
France Belgium and Holland combined accounting for 39bn. However, Austria will see negative
net supply of 10bn due to a bond redemption in October, and negligible issuance needs
following a new 5y issued in September.
Cagdas Aksu
+44 (0)20 7773 5788
Net issuance requirements elsewhere are more mixed. The recent increase in Italian debt
issuance plans to up to c.240bn of BTP, CCT and CTZ issuance, means that the sovereign
has the highest need of any issuer, c.54bn, in the remainder of Q4. However, redemptions
at the beginning of November and December will result in a small net issuance requirement
of 16bn, and with a potential BTP Italia due in the quarter, marketable bond issuance could
be negligible. Spain also has large redemptions of c.16bn at end-October; and with lower
auction sizes likely until end-2013, we expect net issuance requirements for that period of
just over 1bn.
FIGURE 1
Forecast gross and net issuance by month and country for the remainder of 2013 ( bn)
Germany France
Rest of
Oct 13
Nov-13
Dec-13
Rest of
2013
Italy
Spain
Belgium Holland Portugal Finland
Austria
Greece
Ireland
Total
Gross Issuance
17.0
18.0
17.5
4.0
2.5
2.5
0.0
1.5
0.0
0.0
0.5
63.5
Redemptions
16.0
21.6
0.0
16.2
0.0
0.0
0.0
0.0
13.1
0.0
0.0
66.9
Net
1.0
-3.6
17.5
-12.2
2.5
2.5
0.0
1.5
-13.1
0.0
0.5
-3.4
Gross Issuance
13.0
17.0
25.5
8.0
2.5
5.5
0.0
0.0
1.7
0.0
0.0
73.1
18.1
Redemptions
0.0
0.0
18.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
Net
13.0
17.0
7.4
8.0
2.5
5.5
0.0
0.0
1.7
0.0
0.0
55.0
Gross Issuance
9.0
4.5
11.0
5.5
0.0
0.0
0.0
0.0
1.5
0.0
0.0
31.5
Redemptions
15.0
0.0
20.0
0.0
0.2
0.0
0.0
0.0
0.0
0.0
0.0
35.2
Net
-6.0
4.5
-9.0
5.5
-0.2
0.0
0.0
0.0
1.5
0.0
0.0
-3.7
Total Gross Issuance
39.0
39.5
54.0
17.5
5.0
8.0
0.0
1.5
3.2
0.0
0.5
168.1
Total Redemptions
31.0
21.6
38.1
16.2
0.2
0.0
0.0
0.0
13.1
0.0
0.0
120.2
Total Net
8.0
17.9
15.9
1.3
4.8
8.0
0.0
1.5
-10.0
0.0
0.5
47.9
Longer-term issuance forecasts 2014-15

Figure 2 outlines our expectations for supply in 2014-15. Forecasts are from official sources
where available for 2014, and where unavailable, from our estimates of cash deficits plus
forecast bond redemptions. For the programme countries, we use redemption and bond
issuance and EU/IMF funding levels from the official programme documents or from
National Treasury sources where available. We assume that net T-bill issuance will remain
flat y/y and that financing needs will be met entirely from capital market issuance.
Therefore, we would be mindful that other forms of financing used (such as ECP, retail
4 October 2013
26

issuance, MTN issuance, privatisation revenues, etc) could reduce the ultimate bond
issuance requirements, as has been the case in the past few years.
Our initial expectations for individual gross bond issuance in the euro area for 2014 show a
decrease of about 5bn, with total gross bond issuance forecast at 872bn (and a total
funding requirement of 903bn), versus a current 2013 estimate of 877.5bn for gross
bond supply. Net bond issuance including redemptions from programme countries is
expected to fall by some 65bn in 2014 to 224bn. These forecasts assume no bond
issuance from Greece, despite a 4.4bn financing gap in its current official 2014
programme. However, we assume Portugals additional financing needs of 9bn, as
identified by the IGCP, will be met by bond issuance. We also believe Ireland will continue to
access bond markets although pre-funding in 2012 and 2013 means that 2014
requirements have already been met and the 7bn target reflects a smoothing of funding
needs in 2014 and 2015 combined.
Italys 240bn of BTPs, CCTs
and CTZs supply leaves it the
largest issuer by some distance
In terms of individual gross issuance, Maria Canatta said Italian gross debt issuance in 2014
would be broadly similar to that in 2013. We expect bills supply to remain flat; thus, 240bn
of BTP, CCTs and CTZs supply will leave Italy as the largest issuer by some distance. France
has forecast 174bn of bond issuance net of buybacks (although this will likely be
eventually reduced to reflect buybacks of bonds redeeming in 2014 that take place in Q4).
We do, however, assume an additional 18bn of issuance to fund buybacks of debt falling
due in subsequent years (ie, 192bn funding in gross terms). Thereafter, Germanys draft
budget released on 13 August foresees c.108bn of 5y, 10y and 30y supply, alongside total
schatz and bills supply of 109bn, translating into expected bond issuance of 158bn,
which could be supplemented by c.10bn of linker issuance. We expect supply in the
Netherlands to be similar to the 50bn in 2013. Spain has announced total debt issuance
will be 243.9bn in 2014. There will be no contribution in net issuance terms from bills;
thus, a bond supply target of about 130bn, compared with c.121bn this year, seems
likely, in our opinion, although that does not include any requirement for regional funding.
Of the smaller issuers, in Belgium we forecast a total funding requirement of c.37bn,
although the announced 2014 OLO issuance could be a little lower than this, as MTN and
retail issuance make up the balance. Notably, however, there will be no additional
borrowing to fund a so-called popular borrowing plan in Belgium, with household savings
locked in for five years, but enjoying a 10pp reduction in the withholding tax to 15% to be
used to finance socially responsible projects in the public and private sectors (including
lending to SMEs). A high level of redemptions in Austria should see supply increase to as
much as 30bn in 2014, while Finlands bond funding needs could fall to as low as 10bn.
2015 bond market funding is

forecast to rise by c.16bn;
however, this is primarily due
to higher redemptions
4 October 2013
Looking beyond 2014, funding requirements nevertheless remain high in the euro area. We
include expected cash deficits for the main euro area issuers to forecast bond redemptions
for 2015 in order to estimate longer-term bond issuance requirements. In 2015, bond
market funding is thus forecast to rise by c.16bn; however, this is primarily due to higher
redemptions as net issuance starts to decline sharply.
27

FIGURE 2
Long-term euro area financing needs, 2014-15 ( bn)
Total
Euro
Area
Germany France
Italy
Spain
Belgium Holland Finland Austria Portugal Greece
Ireland
2014 f/c
Financing Needs:
Forecast Bond
Redemptions
647
144
106
190
68
29
32
24
14
0
221
-8
76
37
60
18
Bond Funding
869
168
192
240
128
37
50
30
EU/ IMF Funding
27
Financing Gap
IMF - redemptions
Cash deficit
25
Financing Sources:
7
19
Own resources (use of cash etc)
Total Funding
906
168
192
240
128
37
50
30
21
24
Memo - Net Bond Issuance
222
24
86
50
60
18
-6
-21
-1
720
151
130
200
92
33
50
13
16
16
0.5
8.6
5.7
174
-10
69
32
48
13
Bond Funding
893
151
217
233
139
36
64
10
18
19
EU/ IMF Funding
11
Financing Gap
2015 f/c
Financing Needs:
Forecast Bond
Redemptions
IMF - redemptions
Cash deficit
Financing Sources:
7
11
Own resources (use of cash etc)
Total Funding
922
151
217
233
139
36
64
10
18
19
24
12
Memo - Net Bond Issuance
173
87
32
48
13
-10
-2
Note: 2014 France bond funding forecast includes an expectation of 18bn of issuance to fund debt buybacks. These buybacks will reduce forecast FRTR bond
redemptions in 2015 by the same amount. Source: Barclays Research
4 October 2013
28
Next weeks cash flows

The Netherlands will auction 1.5-2.5bn of the 5y DSL on Tuesday alongside 1bn of a 5y
OBLei tap in Germany. The following day Germany will tap 4bn of the conventional OBL,
while at the end of the week Italy will sell 3y and long-end BTPs alongside a CCT auction.
Support for the market will come primarily from 16bn of redemption payments in Germany.
FIGURE 3
Barclays cash flow expectations for week beginning 7 October 2013
Beginning
Weekly
Net
Cash flow
Auction Date
Issuance
Redemptions
Coupons
Net Cash Flow
Germany
5.00
16.00
1.35
-12.35
France
0.00
0.00
0.00
0.00
-3.35
Italy
6.50
0.00
0.00
6.50
15.91
-45.62
Spain
0.00
0.00
0.00
0.00
Belgium
0.00
0.00
0.00
0.00
23-Sep
30-Sep
-0.13
-13.66
07-Oct
14-Oct
21-Oct
Net Cash Flow is issuance minus redemptions minus

coupons. Negative number implies cash returned to
the market.
Total issuance
14.00
Total redemptions
16.00
Total coupons
1.35
Net cash flow
-3.35
Greece
0.00
0.00
0.00
0.00
Finland
0.00
0.00
0.00
0.00
Ireland
0.00
0.00
0.00
0.00
Holland
2.50
0.00
0.00
2.50
Austria
0.00
0.00
0.00
0.00
Portugal
Total
0.00
14.00
0.00
16.00
0.00
1.351
0.00
-3.35
4 October 2013
29
UK RATES STRATEGY
Post-supply flattening bias in long gilts

Moyeen Islam
+44 (0)20 7773 4675
moyeen.islam@barclays.com
We expect nothing material

from the October MPC
meeting
although the PMIs suggest
continued economic strength
The long end has performed

well recently
despite the post-FOMC
richening of intermediate
forwards
Long -end nominal supply is
notably lower in risk terms
than in previous years
Some concession seems likely into upcoming ultra-long supply. However, the relatively
light supply schedule and improving funding position of defined benefit schemes
suggests that the long end can richen, and the curve flatten into year-end.
The September PMI series have continued the strong run of UK data and are consistent with
a very strong growth outturn for Q3 13 (Figure 1). The most recent MPC speakers have all
forward rate guidance and why they remain relaxed on the housing market where they see
no evidence that a bubble has yet to emerge nationally. So ahead of the October MPC
decision, we see little reason to expect any change in the MPCs policy stance and any
accompanying statement to offer little new information. The average of the employment
sub-components for the three separate indices has continued to move higher and is
consistent with ongoing unemployment rate declines (Figure 2).
Notably, over the past few weeks, the long end of the curve has performed relatively strongly,
despite ongoing supply and the lack of taper from the Fed. Figure 3 shows the change in
benchmark curve spreads on the forward swap curve since the advent of forward rate
guidance and also since the FOMC meeting on 17-18 September. The post-Fed environment
has seen outperformance in the belly of the curve, with GBP 2y3yf and GBP 5y5yf driving a
flattening in the front end of the forward curve and despite some recent resteepening, the
longer dated forwards have outperformed and the macro curve has come under flattening
pressure. Figure 4 shows the flattening of the forward gilt curve has broadly been in line with
the moves at the front end of curve. We estimate that the final quarter of the year will see the
DMO supply some 34.6bn equivalent to 3.9mn/bp in risk terms. This compares with an
average gross supply of 39.8bn over the last three fiscal years, or 60mn/bp in risk terms.
Clearly, forthcoming supply in Q4 13, while only slightly lower (5.2bn) than previous years,
in risk terms is markedly lower. The main supply even for the quarter will be the syndicated
reopening of UKT 3.5% July 2068 in the second half of October. The DMO estimates the
remaining syndicated nominal supply for the fiscal year at 3.7bn.
FIGURE 2
PMI Employment Index vs change in ILO U rate (pp, RHS)
FIGURE 1
UK PMI series continue to point to economic strength
Real GDP q/q (RHS)
60
GDP weighted composite PMI

55
Average of PMI Employment Series (3mMA)
2.0%
1.5%
1.0%
60
change in ILO Unemp rate (3m MA, lagged 3m)

(RHS inverted scale)
-0.2
55
-0.1
50
45
0.1
40
0.2
35
0.3
0.5%
50
0.0%
-0.5%
45
-1.0%
-1.5%
40
Source:
Have Analytics, Barclays Research
4 October 2013
Jun-13
Jun-11
Jun-09
Jun-07
Jun-05
Jun-03
-3.0%
Jun-01
35
Jun-99
-2.5%
Jun-97
-2.0%
Source: Haver Analytics, Barclays Research.
30
FIGURE 3
Changes in GBP forward swap curve (bp)
30
FIGURE 4
Gilt curve flattening has been in line with front end
vs 17 Sep 13
vs 06 Aug 13
250
Gilt 5y5y/15y15y
200
Gilt 1y1y/1y2y (RHS, inverted scale)
20
20
10
0
150
40
-10
100
60
-20
50
80
100
-50
120
-100
140
-30
Source:
Barclays Research
The outperformance of the

long end has been coincident
with improving DB pension
liabilities
and a pick-up in domestic
demand for gilts
We would expect this trend to

continue into year-end
40,000
Non-MFI resident gilt

purchases 12m rolling sum
20,000
10,000
0
-10,000
-20,000
-30,000
-40,000
1997 1999 2001 2003 2005 2007 2009 2011 2013
Haver Analytics, Bank of England, Barclays Research
4 October 2013
Oct-13
Apr-13
Oct-12
Apr-12
Oct-11
In risk terms this is around 9.1mn/bp (around 90,500 Long Gilt Futures contracts
equivalent). This single operation would represent around 20% of the risk that the market
will be asked to absorb in Q4 13. The remaining long-dated nominal supply is reopenings of
the 2036s in November (2.75bn) and the 2044s in December (2.5bn) totalling 9mn/bp
in risk. The strength of the long end is reflects not only the front-end moves but also the
steady demand increase for gilts from non-MFI domestic investors. On a rolling 12m basis,
we have seen a sharp turnaround in flow, which was a cumulative 21.3bn at the end of
August (Figure 5). The resurgence of domestic real money demand has coincided with an
improvement in the overall funding position of defined benefit pension schemes, which
based on the PPF 7800 series, has increased to 91%. This equates to a ten percentage-point
improvement over the year, underpinned by a 70bn improvement in estimated liabilities
year to date, which has coincided with the back-up in long-dated gilt yields (using the yield
in the FTSE 15y+ Gilt Index as a proxy, Figure 6). The coincident improvement in both the
liability position and rise in yields, coupled with a relatively light long-dated supply schedule
after the 2068 syndication, suggests to us that the long end could remain well supported
until year-end.
30,000
Source:
Apr-11
FIGURE 5
Domestic non-MFI gilt purchases(mn, rolling 12m sum)
50,000
Oct-10
1y1y/15y15y
5y5y/15y15y
10y10y/15y15y
5y5y/10y10y
2y3y/5y5y
1y1y/5y5y
1y1y/2y3y
1y1y/1y2y
1y/1y1y
-40
FIGURE 6
Pension liabilities (mn) vs +15y yield (%, RHS, inverted)
1,500
2.5
Liabilities
FTSE + 15yr Index Yield
1,400
3.0
1,300
3.5
1,200
1,100
4.0
1,000
4.5
900
800
5.0
700
5.5
600
500
Mar-03
Source:
6.0
Mar-05
Mar-07
Mar-09
Mar-11
Mar-13
Pension Protection Fund, Bloomberg , Haver Analytics
31
FIGURE 7
Long nominal gilts Consecutive implied forwards (%)
5.75
implied forward
5.50
5.25
5.00
4.75
4.50
4.25
4.00
3.75
3.50
3.25
3.00
2.75
4.50% 3.25% 4.25% 4.25% 3.75% 4.25% 4.00% 3.50%
Dec
Jan
Dec
Dec
Jul
Dec
Jan
Jul
2042 2044 2046 2049 2052 2055 2060 2068
With implied forwards into the

2068 gilt looking rich
the supply set-up will
probably come from cash-forcash shorteners.
but post supply, we would

expect the long end to
outperform outright
and on the curve into
year-end
4 October 2013
FIGURE 8
Selected long gilt implied forward rates in 2068 gilt (%)
3.75
3.65
3.55
3.45
2044/2068
2052/2068
3.35
Jul-13
2060/2068
Aug-13
Sep-13
Oct-13
In terms of bond RV, Figure 7 shows the implied bond forwards between consecutive bonds
in the long end of the nominal curve, The 2044s, which have still to complete their tapping
cycle, stand out as notably cheap, with an implied forward yield above 5%. With two long
nominal auctions due in Q1 14, at least one is likely to be for the 2044 gilt to bring it up to
around 25bn outstanding. There is a wider issue around whether the DMO needs to issue
a new 30y gilt in FY2014/15. Should the DMO feel that there is no compelling need to have
one, this could leave the 2044s with room to perform in the medium term. Figure 8 shows
the implied forwards of selected long-dated gilts into the 2068. With the forward rates
looking relatively expensive and the curve intrinsically driven by the front end, we would
expect the set-up for supply to come via cash-for-cash shorteners out of the ultra-long end
into the 30-40y sector. Nevertheless, we would recommend coming out of Octobers supply
overweight the long end and with a curve flattening bias, as the combination of further
corrections in rates level and ongoing year-end demand for longs, should see the long end
outperform outright and on the curve.
32
COVERED BONDS AND SUPRANATIONAL, SUB-SOVEREIGN & AGENCIES
Short-term supply and Spain relative value

update
(This is an edited extract from The AAA Investor, published 4 October 2013)
Fritz Engelhard
+49 69 7161 1725
fritz.engelhard@barclays.com
Michaela Seimen Howat
+44 (0) 20 3134 0134
michaela.seimen@barclays.com
Jussi Harju, CFA
+49 69 7161 1781
jussi.harju@barclays.com
In this weeks AAA Investor, we provide an update on supply conditions in the covered
bond and SSA markets. We also look at relative value opportunities in Spain between
covered bonds and senior unsecured debt.
After the long summer pause, covered bond supply picked up in September, to record
11bn. This was in line with our forecast of 12bn and our annual forecast of 110bn. In
SSAs, supply of around 27bn in September 2013 was slightly short of the 30bn we had
originally estimated. Year to date, around 289bn has been issued in fixed coupon, relative
benchmark-size bonds and it seems that we are still on track to see issuance of 350-360bn
this year. Additionally, while we expect, as in previous years, that many market participants
will seek to close their trading and portfolio books in November, we note that there are still
some issuers pushing part of their funding plans out into late November and December.
With the ESM presenting its inaugural bond issuance in the coming days, Q4 might be
dominated by European supranational issuance.
We update our analysis of relative value between covered and senior unsecured bonds
issued by Spanish banks. The spread differentials between these parts of the capital
structure are currently at their twelve month lows for Spanish banks. In this context, we
recommend investors switch from unsecured debt into covered bonds of higher quality
Spanish banks to benefit from their higher ratings, lower risk weighting and potential
preferential treatment under the BRRD.
FIGURE 1
Spanish senior unsecured/covered bond switch ideas
Our key trade recommendations are:
Switch out of BBVASM 4.875% 16s senior into BBVASM 4.75% 16s covered;
Switch out of SANTAN 4.000% 20s senior into SANTAN 4.000% 20s covered; and
Switch out of CABKSM 3.125% 18s senior into CABKSM 3.000 % 18s covered.
4 October 2013
33
SCANDINAVIA: RATES STRATEGY
Sweden: Ready for a change of pace?

With the cyclical outlook improving, we still see value in holding SEK/EUR
1y1y/1y2yfwd steepeners. We also recommend entering 3m Sep 14/Sep 15 steepeners
and hold on to our 10y SGB ASW wideners.
Mikael Nilsson Rosell

+44 (0)20 7773 6057
mikael.nilsson@barclays.com
Following two years of robust economic recovery well ahead of most other European
countries, Swedish growth has decelerated notably during the past year. Indeed, GDP
growth was virtually flat in H1 13 as lacklustre global growth continued to weigh negatively
on exports and business appetite to invest. However, high frequency data have improved
and paint a more upbeat picture.
Survey data suggest that
underlying growth
momentum in the external
sector is improving
While Swedish GDP surprised to the downside in Q2, posting a -0.2 q/q decline, survey data
have continued to improve, supporting our view that Swedish economic activity troughed
during the summer. Indeed, manufacturing-PMI increased to 50 in September, with export
orders posting its strongest reading (57.2) since April 2011, adding to the evidence that the
underlying growth momentum in the external sector is improving. The new order/stock ratio
also suggests that manufacturing-PMI will continue to improve quite notably during the
coming months, Figure 1. While the service sector PMI dropped slightly in September (0.4
units to 53.3) note that our composite-PMI posted its third consecutive print above 50 in
September, adding to the evidence of a broad-based growth momentum, Figure 2.
Domestic demand will remain

well supported by rising wages
and low inflation.
The favourable conditions for households are intact. Rising wages and low inflation will
likely continue to boost their purchasing power, with real income expected to increase
c2.5% per year during the forecast horizon. Households savings ratio reached the highest
level in more than a decade (16.4% of disposable income) during the second quarter,
suggesting scope for further consumption growth on the back of decreased uncertainty,
especially about labour market prospects. Easy financial conditions, tax cuts and improved
households wealth should also benefit growth. Indeed, our monthly wealth gap index,
derived as the sum of house prices (80%) and OMX stock market (20%) deviation from
trend, has recovered notably from the lows of end 2012, implying that the negative wealth
effect will continue to abate gradually over the coming year, Figure 3.
FIGURE 2
Composite PMI above 50 for the past three months
FIGURE 1
Order/stock ratio suggest for further improvement in PMI
Index
Index
80
1.7
70
1.5
60
1.3
50
1.1
40
0.9
30
0.7
70
65
60
55
50
45
40
20
Jan-98
0.5
Jan-01
Jan-04
Jan-07
Manufacturing-PMI
Source: Reuters, EcoWin, Barclays Research
4 October 2013
Jan-10
Jan-13
Order/stock ratio (RHS)
35
30
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
Composite PMI
34

That said, hard data have continued to lag in July, suggesting some downside risks to our
and the Riksbanks Q3 GDP forecast (0.4% q/q and 0.5% q/q respectively). Hence we will
pay close attention to the August industrial production numbers released on Thursday next
week. The benign inflation outlook and low resource utilization also continue to suggest
that policy rates will be hiked later rather than sooner, in our view. However, while we
continue to see downside risks to the Riksbank medium-term inflation forecast, our
estimate is in line with its forecast going into next weeks release for September (CPI 0.2%
y/y; CPIF 1.1% y/y). The majority of the Riksbanks Boards unyielding concern that a toolow policy rate for too long might nourish medium-term systemic risks, coupled with the
improved cyclical outlook, have likely also increased its resolve to keep policy rates
unchanged at 1.0%
Public debate about macro
prudential framework likely to
remain heated
The debate about the establishment of a macro prudential policy framework will likely
remain the primary focus on the policy agenda going into the New Year, despite the
governments decision to give the FSA the main responsibility for the instruments affecting
financial stability. While the FSA has not yet introduced any new concrete policy measures it
might increasingly prove a pedagogic challenge for the Riksbank to refer to its financial
stability concerns in its monetary policy communication. That said, the communication
from the past week, where Riksbank Board members argued that the FSA should consider
raising the risk-weight floors for banks mortgages further, while the Governor of FSA
suggested that such an increase would be pre-mature, suggest that the public debate
(unfortunately, in our view) might remain heated and a bit confusing.
Trade ideas
Given the benign inflation outlook, the improved cyclical outlook and the RBs concern
about systemic risks we continue to see value in SEK 1y1yfwd/1y2yfwd steepeners versus
EUR. The trade should also benefit from very long-term refinancing operation (VLTRO) that
we anticipate before year-end. On the FRA-curve, we prefer 3m Sep 14 FRA/3m Sep 15
FRA steepeners, with Sep 14 already discounting c.40bp worth of tightening.
SEK 1y1yfwd/1y2yfwd
steepeners versus EUR still
offers value
on FRA-curve, we like
3m Sep 14 FRA/3m Sep 15
FRA steepeners
The improved cyclical outlook and the governments decision to sell its remaining share of
Nordea will likely continue to benefit forward-looking deficit estimates going into the Debt
Office thrice yearly financing need report (23 October). Our outright fair value models for
10y SGB ASW also suggest that spreads are 10-15bp too tight. Hence, we continue to see
value in holding 10y ASW wideners.
FIGURE 3
Negative wealth effect gradually abating, standard deviation
3
FIGURE 4
10y ASW versus model estimate
Bp
-10
-20
-30
-40
-50
-1
-60
-70
-2
-80
-3
-4
Jan-91
-90
Nov-94
Sep-98
Jul-02 May-06
Wealth Gap
4 October 2013
Mar-10
-100
Jan-10
Jan-11
Jan-12
10y ASW Model
Jan-13
10y ASW
35
INFLATION-LINKED MARKETS: UNITED KINGDOM
Priced to go
The IL19 is cheap into its forthcoming auction, and offers structural value but concerns
about the depth of structural 5y linker demand may constrain any outperformance.
Henry Skeoch
+44 (0)20 7773 7917
henry.skeoch@barclays.com
Extent of structural support for

5y linkers is questionable
The DMO is set to auction the IL19 for 1.75bn notional on Tuesday, 8 October. The auction
size, equivalent to just under 1.2mn per bp of risk, is slightly larger than we had expected,
though it is the same size for which the bond was launched on 20 August. Typically, we
would expect first reopenings of the bond to be slightly smaller than the launch size. The
IL19 has performed poorly lately in relative value, trading cheaper than the IL17 in
breakeven. Given the two bonds are both November maturities, there is no seasonality gap
to account for. Our Sonia curve-based model for mortgage interest payment inflation
suggests that the IL17 breakeven should trade approximately 2bp richer than the IL19 all
else equal given the slope of the money market curve. The IL19 breakeven is almost 4bp
cheaper than the IL17, however. The IL17/IL19 forward breakeven at 2.8% implies an
undershoot of the MPC 2% CPI target even before accounting for housing components of
the RPI/CPI basis. We do think the IL19 offers attractive longer-term breakeven value but
only offers compelling risk/reward as a tactical long below a level of 284bp.
We think the recent cheapening of the IL19 is largely pre-auction concession, and may
partially reflect market concern about the depth of structural demand for the issue. Given
the broad market uncertainty stemming from the US at present, we think dealers will also be
wary of a post-auction overhang leaving risk appetite subdued. The 5y sector has been
among the most volatile points on the curve so far this year and suffers from a lack of
structural sponsorship as the mostly widely tracked domestic linker indices are over-5y
(though obviously still include the IL19). While it is far too early to be concerned about the
IL19 index drop, this could become an issue in six months or so. Earlier in the year, there
was decent demand for short linkers. In our view, some of this stemmed from a degree of
expectation that the BoE inflation target might be loosened prior to the arrival of Mark
Carney at the Bank of England. In the end, the 2% CPI target was confirmed, and we believe
most related front-end UK linker positions were unwound during the sharp rate sell-off from
April. We think the IL19 now offers attractive value from a fundamental perspective,
particularly in breakeven and its cheapness in relative value has started to correct at the
time of writing. The issue is also attractive for sonia focused asset swap investors.
FIGURE 2
IL19 fairly attractive in asset swap versus Sonia
FIGURE 1
IL19 cheap in breakeven, particularly versus IL17
12
2.96
50
IL17 z-spread asw vs Sonia

IL19 z-spread asw vs Sonia
10
2.92
45
40
2.88
4
2
2.84
35
0
2.80
-2
IL19 breakeven (%)
IL17/19 breakeven curve slope (RHS, bp)
2.76
22-Aug
4 October 2013
-6
05-Sep
19-Sep
03-Oct
30
-4
25
21-Aug
04-Sep
18-Sep
02-Oct
36
VOLATILITY
Long GBP 3m*5y

Piyush Goyal
+1 212 412 6793
piyush.goyal@barclays.com
Hitendra Rohra
+44 (0)20 7773 4817
hitendra.rohra@barclays.com
The forward-rate guidance by

the MPC has not been
successful in curbing volatility
on short-to-mid rates
We recommend buying GBP 3m*5y low-strike receivers, delta-hedged and initiating 1m

vs. 3m*5y calendar spread as current implied vol levels on 5y tails are low enough to
benefit from volatility due to the data-dependent guidance introduced by the MPC.
One of the channels of the transmission mechanism of forward guidance, according to the
MPC, is via reducing the uncertainty around the path of short-term interest rates (see page 18
of Monetary policy trade-offs and forward guidance, August 2013). The guidance intends to
work, among other things, by suppressing vol of short rates. This, in turn reduces the term
premium on rates, leading to lower rates - the primary goal of easy monetary policy.
Unambiguously, this channel has not worked. 2y*2y vol has risen by more than 15bp/y
since the MPC announced the guidance on August 6 and is more than 30bp/y higher
compared to the beginning of the year.
The price action is in stark contrast to the US where, upon the Feds introduction of forward
guidance in August 2011, 2y*2y vol fell by more than 20bp/y. More importantly, it
continued to leak lower over the next few months and stayed low for almost two years.
The key difference, in our view is, at least initially, the Feds forward guidance was datebased versus the MPCs being data-based. As discussed in the aforementioned document,
the reason the committee preferred data-based guidance was to ensure credibility. At the
same time, the problem of unexpected rises in bank rate, the committee thought, could be
avoided by emphasizing the threshold versus trigger nature of the economic data
conditions. The committee followed through on the plan to placate the market as the
market pulled rate expectations forward and pushed vol higher. In various speeches, 5 the
committee members endeavoured to emphasize that unemployment rate at 7% was a
threshold to reassess the monetary policy and that it does not automatically trigger rate
hikes. Even so, the market continues to price heightened uncertainty about short rates, as
reflected by the persistence of the rise in 2y*2y vol.
The productivity puzzle

as the MPCs projection for a
drop in unemployment rate
may be viewed as pessimistic
by the market
One reason, we think, the forward-rate guidance has not been successful in containing
volatility in the front-end is because the market considers the MPCs projection for the drop
in the unemployment rate to be pessimistic. Essentially, any forecast of the unemployment
rate is complicated by the link between productivity and real GDP growth.
To clearly understand the dependence of the unemployment rate on growth and
productivity, we plot the possible level of unemployment rate three years down the line, for
various scenarios (Figure 1) 6 . Moving across columns, Figure 1 shows how the
unemployment rate, at the three-year horizon, can change if the real annualised GDP
increases from 2.25% to 3.25%. As growth increases, the demand for labour rises too and
leads to a faster drop in the unemployment rate. Similarly, moving across rows shows how
the rate can evolve for various levels of productivity. An increase in productivity means that
the same amount of output can be produced by a smaller force. Therefore, the
unemployment rate rises with productivity, if the rate of growth remains constant.
Generally, the MPCs view seems to be that while productivity could grow at a slow pace in
the initial stages of the recovery, it is likely to pick up as the recovery takes hold. Therefore,
5
For example, Mark Carneys first public speech on August 28 emphasized the threshold nature of the guidance
The table is similar to the one available on page 29 of the forward guidance document released on August 7th by the
MPC
4 October 2013
37
FIGURE 1
The MPC expects productivity to rise with growth and slow
down the fall in unemployment rate
Avg Prod. Growth

(annual.)
UER, 3yr
horizon
FIGURE 2
though productivity has trailed GDP growth recently
Average GDP growth (annualised)
104
2.25%
2.50%
2.75%
3.00%
3.25%
2.25%
9.6%
8.9%
8.3%
7.6%
6.9%
2.00%
8.9%
8.3%
7.6%
6.9%
6.2%
1.75%
8.3%
7.6%
6.9%
6.2%
5.5%
1.50%
7.6%
6.9%
6.2%
5.5%
4.8%
106
102
102
100
98
98
96
94
94
90
Mar-03
Mar-05
Mar-07
GDP: chained vol index
Note: Shows the possible values of unemployment rate, at the three-year horizon
(ending June 2016), for various combinations of GDP (chained volume index)
and productivity (output per hour, whole economy). The calculations have been
done using assumptions of constant population growth rate (16+), average
weekly hours worked, and labour force participation rate. Data are as of end June
2013. Source: Barclays Research
92
Mar-09
Mar-11
Mar-13
Output per hr wrked index (rhs)
Note: As of Q2 13. Source: Barclays Research
even if output were to grow at a faster rate than expected, the productivity would rise too
and, at the very least, slow down the fall in the unemployment rate. In essence, the MPC
expects the unemployment rate to follow a diagonal trajectory (Figure 1).
The MPC is justified in having such expectation. For many years, the changes in real GDP
and productivity have been positively linked. The problem is, the link has weakened lately:
productivity has fallen over the past couple of quarters, even as the economy has embarked
on a gradual recovery (Figure 2).
A de-linkage between productivity and real GDP means, with regards to Figure 1, that the
economy could move perpendicular to the MPCs expectations, implying ending in the
bottom-right of the grid. This increases the uncertainty about the hiking cycle, which is now
linked to the unemployment rate, and therefore leads to volatility in belly rates.
Correlation with USD rates

and GBP rates remain
correlated with USD markets
Another reason for persistence of volatility in GBP rates has been its correlation with the
USD markets. Despite the introduction of the forward-rate guidance, the MPC has been
unable to decouple the belly in GBP from movements in corresponding USD rates. Over the
past few months, as the Fed seemed to emphasize the unemployment rate and payrolls, it
led to heightened volatility in USD mid tails, and the same effect was felt in GBP.
To illustrate this, we show the intraday realised volatility of the GBP 5y swap rate for specific
days on which the US payrolls data were released (Figure 3). The chart shows that the US
payrolls data release has consistently led to a spike in realised volatility of the GBP 5y rate
over the past few months, even after the MPC initiated the forward-rate guidance.
4 October 2013
38

While the Fed refrained from tapering at the last FOMC meeting, it will likely continue its
focus on the labour market for policy action. As a result, the volatility in USD belly rates
should stay relatively high. At the very least, USD vol should trade higher than the levels that
were attained in the period preceding the date-based forward guidance (August 2011) ie
the period when the Fed was on hold but had not tamped down volatility through an
explicit calendar-based guidance.
The existing correlation between the GBP and USD rates means that vol in GBP should face a
similar floor. Figure 4 shows that the implied vol of GBP 3m*5y traded at an average of about
95bp/y, with a minimum of about 76bp/y, for the two years preceding the introduction of
forward guidance in the US in August 2011. We, therefore, expect GBP 3m*5y vol to trade
higher than these levels and like having a long vol exposure in belly gamma.
Buy GBP 3m*5y low-strike receivers, delta-hedged

Given our view that GBP mid-tails are likely to move around depending on the nature of the
incoming UK data, as well as volatility in the USD rates, we like trades that monetise the
realised volatility of these rates. The most straight-forward way of doing this is by buying
GBP 3m*5y straddles and delta-hedging it at regular intervals. The entry level on the trade is
good as the implied vol of GBP 3m*5y options at about 87 bp/y (or 5.5bp/d) is at c.15%
discount to the 20d realised vol.
Buy GBP 3m*5y low-strike
receiver delta-hedged
Alternatively, one can also initiate a GBP 3m*5y ATM-25bp receiver, delta-hedged. Implied
vol of 25bp low-strike GBP 3m*5y receiver is about 6 bp/y lower than that of ATM receivers,
implying that they are cheaper to initiate. Since realised vol in GBP is high, it is likely that in a
rate rally, implied vol may not fall as much as is being suggested by the skew thereby
leading to further gains.
Sell GBP 1m*5y vs buy GBP

3m*5y calendar spread
Finally, investors who do not wish to put on trades that require delta hedge, may initiate a
calendar spread. Specifically, we recommend buying 100mn GBP 3m*5y ATM straddle
versus selling 60mn GBP 1m*5y ATM straddle. The trade in this form is gamma neutral
and should, therefore, not incur sharp losses if rates were to drift sharply in the near term.
As of 3 October 2013, the trade costs about 105cts to put on, at mid-levels. It also carries
FIGURE 4
GBP 3m*5y traded above 76bp/y before the US Fed had
introduced date-based forward guidance
FIGURE 3
US payroll data have led to volatility in GBP rates
Realised volatility (bp/5mn)
1.7
120
1.3
100
0.9
80
0.5
60
0.1
9:00
11:00
Sep 13
13:00
Aug 13
15:00
Jul 13
17:00
Apr-Jun 13
Note: Shows intraday realized volatility of GBP 5y swap rate for days on which
the US payrolls data were released. The realized volatility is calculated over a 60minute window using intraday data spaced at 5 minute intervals.
Source: Bloomberg, Barclays Research
4 October 2013
40
01-Jan-09
01-Jan-10
01-Jan-11
01-Jan-12
01-Jan-13
GBP 3m*5y implied vol (bp/y)

Note: The shaded region corresponds to the period from Aug 2009-11, i.e. the
period preceding the introduction of the forward-rate guidance by the Fed. The
light blue line corresponds to the level of 76bp/y, the minimum level reached by
the GBP 3m*5y implied vol in that period. Data are as of October 2, 2013.
39

positively, about 25cts in 1m, and is, therefore, easier to hold from an MTM perspective.
Besides this, it is also limited loss in nature, with the maximum loss limited to the amount of
initial premium paid.
4 October 2013
40
GLOBAL SUPPLY CALENDAR

Country
Euro Area
08-Oct-13
09-Oct-13
11-Oct-13
11-Oct-13
11-Oct-13
16-Oct-13
17-Oct-13
17-Oct-13
17-Oct-13
17-Oct-13
17-Oct-13
17-Oct-13
22-Oct-13
22-Oct-13
23-Oct-13
28-Oct-13
28-Oct-13
28-Oct-13
28-Oct-13
30-Oct-13
30-Oct-13
30-Oct-13
01-Nov-13
01-Nov-13
Nov-13
05-Nov-13
05-Nov-13
06-Nov-13
07-Nov-13
07-Nov-13
Japan
08-Oct-13
10-Oct-13
16-Oct-13
18-Oct-13
22-Oct-13
29-Oct-13
01-Nov-13
06-Nov-13
UK
Oct-13
08-Oct-13
17-Oct-13
05-Nov-13
US
08-Oct-13
09-Oct-13
10-Oct-13
24-Oct-13
28-Oct-13
29-Oct-13
30-Oct-13
Bond
Coupon
Maturity
Size - bn
Germany
Germany
Italy
Italy
Italy
Germany
Spain
Spain
France
France
France
France
Finland
Finland
Germany
Italy
Belgium
Belgium
Belgium
Italy
Italy
Germany
France
France
Italy
Austria
Austria
Germany
Spain
Spain
OBLi Auction
5y OBL Auction
3yr BTP Auction
5yr CCT Auction
15y BTP
2y Schatz Auction
3y SPGB
13y SPGB
2y OAT
3y OAT auction
5y OAT Auction
OATi /ei Auctions
5y RFGB Auction
10y RFGB Auction
30y Bund Auction
BTPei Auction
5y BGB Auction
7y BGB Auction
10y BGB Auction
5y BTP Auction
10y BTP Auction
10y Bund Auction
New 10y OAT
30y OAT
New BTP Italia
5y RAGB Auction
20y RAGB Auction
5y OBL Auction
New 3y SPGB
10y SPGB
0.75%
1.00%
2.75%
FRN
4.75%
0.25%
3.30%
5.900%
0.25%
3.250%
1.00%
15-Apr-18
15-Oct-18
15-Nov-16
01-Nov-18
01-Sep-28
11-Sep-15
30-Jul-16
30-Jul-26
25-Nov-15
25-Apr-16
25-Nov-18
1.13%
1.50%
2.50%
15-Sep-18
15-Apr-23
04-Jul-44
1.25%
3.75%
2.25%
3.50%
4.50%
2.00%
2.00%
3.25%
22-Jun-18
28-Sep-20
22-Jun-23
01-Dec-18
01-Mar-24
15-Aug-23
25-May-24
25-May-45
1.00
4.00
3.00
1.50
2.00
5.00
2.00
1.50
3.50
1.50
3.50
1.50
0.75
0.75
2.00
1.00
0.75
0.75
1.50
3.00
3.00
4.00
5.00
2.50
1.25%
2.40%
1.00%
19-Oct-18
23-May-34
12-Oct-18
Japan
Japan
Japan
Japan
Japan
Japan
Japan
Japan
10y JGBi Auction

30y JGB Auction
5y JGB Auction
Liquidity Enhancement Auction
20y JGB Auction
2y JGB Auction
Liquidity Enhancement Auction
10y JGB Auction
UK
UK
UK
UK
2068 Tap
2019 Linker Auction
2018 Gilt Auction
Linker 2052 Auction
US
3y Note Auction
US
10y Note Auction
US
30y Bond Auction
US
30y TIPs Auction
US
2y Note Auction
US
5y Note Auction
US
7y Note Auction
Unconfirmed Barclays Research Estimate
Rich
Cheap
4.40%
31-Oct-23
0.83
0.83
4.00
3.00
1.50
200
700
2600
300
1200
2700
300
2400
3.50%
0.125%
1.25%
0.125%
22-Jul-68
22-Nov-19
22-Jul-18
22-Mar-52
3.50
1.75
4.50
0.90
30
21
13
7
32
35
29
4 October 2013
41
GLOBAL BOND YIELD FORECASTS

US Treasuries
US swap spreads
Fed funds
3m Libor
2y
5y
10y
30y
10y RY
2y
5y
10y
30y
Q4 13
0.00-0.25
0.25
0.40
1.65
2.85
3.85
0.50
Q1 14
0.00-0.25
0.25
0.50
1.90
3.00
3.95
0.50
Q4 13
15
15
15
-5
Q1 14
15
15
15
Q2 14
0.00-0.25
0.25
0.65
2.10
3.25
4.15
Q3 14
0.00-0.25
0.30
0.85
2.35
3.50
4.30
0.85
Q2 14
15
15
15
1.10
Q3 14
15
15
15
Euro government (Germany)
Euro area swap spreads
Refi rate
3m
2y
5y
10y
30y
10y RY
2y
5y
10y
30y
Q4 13
0.50
0.25
0.30
1.05
2.05
2.85
0.20
Q1 14
0.50
0.25
0.35
1.15
2.20
3.00
0.20
Q4 13
40
50
38
Q1 14
42
52
40
Q2 14
0.50
0.30
0.45
1.30
2.35
3.10
Q3 14
0.50
0.35
0.60
1.45
2.50
3.25
0.30
Q2 14
42
52
40
0.40
Q3 14
42
52
40
UK government
UK swap spreads
Bank rate
3m
2y
5y
10y
30y
10y RY
2y
5y
10y
30y
Q4 13
0.50
0.52
0.70
1.70
2.75
3.65
-0.40
Q1 14
0.50
0.52
0.80
1.80
2.85
3.70
-0.30
Q4 13
30
10
15
-25
Q1 14
30
10
15
-25
Q2 14
0.50
0.55
0.90
1.90
3.00
3.75
Q3 14
0.50
0.60
1.00
2.00
3.10
3.75
-0.10
Q2 14
25
10
-25
0.00
Q3 14
25
10
-25
Japan government
Japan swap spreads
Official rate
3m
2y
5y
10y
30y
10y RY
2y
5y
10y
30y
Q4 13
0.10
0.23
0.12
0.25
0.75
1.75
0.00
Q4 13
14
14
14
12
Q1 14
0.10
0.23
0.13
0.33
0.90
1.80
0.20
Q1 14
13
13
13
12
Q2 14
0.10
0.23
0.14
0.35
0.95
1.80
0.25
Q2
14
12
12
12
12
Q3 14
0.10
0.23
0.15
0.38
1.00
1.85
0.35
Q3
14
12
12
12
12
4 October 2013
42
EUROPEAN ECONOMICS AND RATES STRATEGY RESEARCH

Economics
Philippe Gudin
Head of European Economics Research
+33 (0) 1 4458 3264
philippe.gudin@barclays.com
Francois Cabau
European Economist
+44 (0) 20 3134 3592
francois.cabau@barclays.com
Fabio Fois
European Economist
+39 02 6372 2637
fabio.fois@barclays.com
Thomas Harjes
Senior European Economist
+49 69-7161 1825
thomas.harjes@barclays.com
Simon Hayes
Chief UK Economist
+44 (0)20 7773 4637
simon.hayes@barclays.com
Apolline Menut
European Economist
+44 (0)20 3555 0862
apolline.menut@barclays.com
Fabrice Montagne
Senior European Economist
+33 (0) 1 4458 3236
fabrice.montagne@barclays.com
Antonio Garcia Pascual

Chief Euro-Area Economist
+44 (0)20 313 46225
antonio.garciapascual@barclays.com
Tal Shapsa
International Economist
+44 (0)20 3555 2940
tal.shapsa@barclays.com
Blerina Uruci
UK Economist
+44 (0)20 7773 4373
blerina.uruci@barclays.com
Rates Research/Strategy
Laurent Fransolet
Head of European Fixed Income,
Commodities and Credit Research
+44 (0)20 7773 8385
laurent.fransolet@barclays.com
Cagdas Aksu
European Strategy
+44 (0)20 7773 5788
Fritz Engelhard
German Head of Strategy
+49 69-7161 1725
fritz.engelhard@barclays.com
Jussi Harju
European Strategy
+49 69 7161 1781
jussi.harju@barclays.com
Moyeen Islam
Fixed Income Strategy
+44 (0)20 777 34675
moyeen.islam@barclays.com
Sreekala Kochugovindan
Asset Allocation Strategy
+44 (0)20 7773 2234
sreekala.kochugovindan@
barclays.com
Giuseppe Maraffino
+44 (0)20 313 49938
giuseppe.maraffino@barclays.com
Mikael Nilsson
+44 (0)20 7773 6057
mikael.nilsson@barclays.com
Hitendra Rohra
+44 (0)20 7773 4817
hitendra.rohra@barclays.com
Michaela Seimen
SSA & Covered Bond Strategy
+44 (0) 20 3134 0134
michaela.seimen@barclays.com
Henry Skeoch
Inflation-Linked Strategy
+44 (0)20 777 37917
henry.skeoch@barclays.com
Khrishnamoorthy Sooben
Inflation-Linked Strategy
+44 (0)20 7773 7514
khrishnamoorthy.sooben@
barclays.com
Huw Worthington
European Strategy
+44 (0)20 7773 1307
huw.worthington@barclays.com
4 October 2013
43
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European Economics & Rates Strategy

Global Traders Guide

Global Economics Calendar

Critical events calendar for US, Euro Area,

UK Data Review and Preview

Global Supply Calendar

Global Bond Yield Forecasts

All content in this report is previously

Barclays | Euro Weekly

EURO AREA ECONOMIC FORECASTS

Calendar year average

Real GDP (saar)

Real GDP (y/y)

Inventories contribution (pp)

Final dom. demand cont. (pp)

Net exports contribution (pp)

Industrial output (ex construct.) -0.5

CPI inflation (y/y)

Core CPI (ex food/energy) y/y

Current account % GDP

Government balance % GDP

Refi rate (period end %)

Hold onto receive EUR 5y5y/5y10y/5y15y fwds.

EUR: Keep long 10s/30s ASW box in France.

Barclays | Euro Weekly

EURO AREA OUTLOOK

Europe slowly leaving the demons behind

+33 (0) 1 4458 3236

As the ECB repeated last months messages, we continue to expect a VLTRO to be

Retail sales point to some

Source: Haver Analytics, Barclays research

Real GDP (% q/q, 1 quarter

Barclays | Euro Weekly

ECB keeps all options on the table to avoid liquidity accidents

Political mayhem in Italy deters

Political future still to be

Source: Barclays Live

Source: Haver Analytics, Barclays Research

Barclays | Euro Weekly

Politics start to drive economic policy

new policy announcements designed to cement the governments standing.

The controversial second leg of

PMI-based GDP indicator

Source: Haver Analytics, Barclays Research

Barclays | Euro Weekly

The Chancellor is to commit to

The proposed fuel duty freeze

As the election looms, public

Barclays | Euro Weekly

GLOBAL TRADERS GUIDE

Key data and events

Barclays | Euro Weekly

GLOBAL WEEKLY CALENDAR

Luxembourg: Parliament dissolved

Indonesia: Bank Indonesia Reference rate, %

Barclays | Euro Weekly

New Zealand: Card spending, % m/m

Germany: 5y OBL Auction

Brazil: Selic overnight rate, %

Global: IMF/World Bank annual meeting (to 13/10)

Barclays | Euro Weekly

Australia: Participation rate, %

Barclays | Euro Weekly