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Reading The Swedish Markets

ByDanske Markets
Published 09/06/2013, 10:26 AM
Updated 05/14/2017, 06:45 AM

The Riksbank's (RB) policy strategy is a compromise. It openly states that lower rates would help to bring inflation back towards the target more quickly but household debt remains an issue to weigh in. So, the compromise is to keep rates low (but not lower) for a while. We expect this strategy to hold until the RB really is convinced that the time is right to move higher but then, rates will probably be raised more quickly than implied by longer FRAs.

Considering the surprisingly sharp drop in unemployment in July, a word of warning is warranted. It would be surprising if data continued down at the pace seen recently

We maintain most of our recommendations but adjust some of the strategies profit/stop levels after the hefty rate movements recorded over the past few weeks. We see more room for a steeper real rate curve (a trade we recommended at the beginning of the week), but in order to protect the position for a possible rebound in longer interest rates it looks, tactically, interesting to buy the 2s10s nominal bond curve against the real rate curve, thus a flatter BEI rate curve.

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