There is no interesting data on the agenda in Sweden in the forthcoming week. Last week we published a comprehensive report on the Swedish covered bond and housing market.
In Norway , we now expect an unchanged key rate at the rate-setting meeting on Thursday. Back in June, Norges Bank indicated an almost 100% probability of a cut in September but the risk outlook has since changed significantly. There are now clear signs that growth in the Norwegian economy is picking up and that the risk of a deeper and more protracted downturn has decreased greatly. Furthermore, the housing market tightened considerably over the summer, with big price increases, high turnover and limited supply. This means that a further rate reduction is no longer necessary when it comes to growth and is also less desirable when it comes to the housing market, given the risk to financial stability. Finally, inflation has also been much higher than expected.
All in all, it points to an upward revision of the central bank's interest rate path relative to June but it will still probably show an almost 50/50 chance of a cut before the end of the year. The reason is that, in isolation, high NIBOR premiums and a relatively strong krone are pulling the path down and so preventing a cut from being completely ruled out. We believe this is very much in line with current market pricing, so we do not expect any major reaction.
In Denmark , the Debt Office will tap the usual 2Y and 10Y benchmark on Wednesday. We expect to see good demand for especially the 10Y benchmark bond (DGB Nov 2025).
Danish government bonds have performed strongly over the past month. The combination of stable low money market rates, a pick-up to Germany, buy-backs from the Debt office funded by the governments account at the central bank, modest supply for the rest of 2016 and in 2017 together with the upcoming redemption of the DEG '16 have all been factors supporting the DGB market.
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