There is an evident risk that Swedish corporations will react differently this time and enforce a greater proportion of lay-off notices. The prospect that this will convince the Riksbank to cut the repo rate forcefully, however, is limited as at least part of the rise in unemployment appears to be structural.
The Swedish FSA has published new regulations on liquidity management.
The government wants more long bonds. longer than 12 years, in the guidelines for debt management.
Trades
New: Buy SWH186, sell SWH185 in a tail (nom/nom) against a forward starting swap in what we label a forward ASW spread. Earlier in the week we recommended adding this position to the already established fwd ASW spread SHYP1575/SHYP1579. We are close to the profit target in the old trade and take a step further out on the curve by adding the new trade. Do the spread @ +84bp and set the P/L: +50bp/+100bp. Total carry and roll down in the trade is 2.45bp/m.
Profit Taken: Earlier in the week we also decided to close down the position for a steeper real rate curve, SGBi3105/SGBi3102, ahead of the CPI that was published on Tuesday. The position gave a small profit equal to 5bp when taking negative carry into consideration
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