1Y1Y Spread SEK/EUR At Attractive Levels Amid Altered ECB Pricing And Se

Published 11/17/2015, 07:43 AM
Updated 05/14/2017, 06:45 AM

Receive SEK 1Y1Y vs EUR 1Y1Y @ +6bp. P/L : -10bp/17bp. Roll down +7.5bp/3m.

Swedish SGBs have underperformed significantly recently, due to supply woes and foreign selling. This has been contagious for short-end interest rates, which have moved higher despite the soft Riksbank announcement at the end of October. Simultaneously, as the pricing of ECB is getting more and more aggressive, more than 10bp of rate cut is now priced at the December meeting and another 10bp up until next summer. We view this uncommon move in the two money markets (rates moving in opposite directions) as a good opportunity to receive SEK vs pay EUR in the 1Y1Y spread. The steepness of the Swedish curve has resulted in a very attractive roll-down relative to the EUR leg of the position, for the moment 7.5bp over three months.

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