In Sweden, the week ahead has only one data point of interest: the labour force survey (Thursday at 09:30 CEST), including hours worked, employment and the unemployment rate.
In the government bond market, Sweden is once again tapping in the upcoming 5Y benchmark and the 10Y benchmark: this time SEK 1.75bn in each bond. We expect to see solid demand for both bonds given that the Riksbank is on hold with a clear dovish twist. We prefer the 5Y segment relative to Germany given the healthy pickup and roll-down at the Swedish curve.
We argue that the money market is too steep in Sweden relative to Norway and recommend paying NOK 1Y 2Y forward against Sweden. We also recommend paying NOK 2Y2Y swap outright.
Economic growth in Norway appears to be picking up and we estimate that mainland GDP rose by 0.8% q/q in Q2 (due Thursday at 10:00 CEST). It is well above the Norges Bank forecast at 0.45% q/q and should support our view that Norges Bank will lift its rate path at the monetary policy meeting in September.
Despite recent underperformance in NGBs, we expect demand at Tuesday's NGB auction in Mar'24 to be decent. Demand should be supported by the constructive outlook for the Norwegian krone and a healthy demand picture for NGBs. Norway is well ahead with issuance for 2014 and, at the same time, Norges Bank will conduct the third buyback auction in NGB May'15 bond. The latter should add liquidity to the market.
On Tuesday 19 August, Denmark is tapping in the 5Y and 10Y benchmark. The auction should be fairly uneventful. DGB 1.75% 2024 is the cheapest bond on the curve (when looking at forward rates) and has a decent spread to Germany. However, as the bond is becoming the 10Y benchmark, performance is likely to be slow and we will probably have to wait until Q4 before it really performs.
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