Starting on Wednesday, February 19th (depending on market conditions), Kommuninvest will introduce a new loan (SE0005705621) matching SGB1047 and maturing on 1 December 2020. The coupon rate is set at 2.5%. The relatively small volume should help the introduction of the loan. Initial issuance will be done against swaps, meaning that the net supply of interest rate risk to the market will be none.
Relative to mortgage curves, longer Kommuninvest bonds have performed somewhat since the levels we saw before the turn of the year, when longer maturities traded close to matching mortgage bonds. In our view, such levels were extremely attractive for investors where the zero risk weighting matters, such as bank treasuries. In Outlook 2014, we suggested substituting longer dated mortgage bonds for long dated Kommuninvest as the uncertainties regarding supply volumes are smaller, and the carry against government bonds is nearly as high.
To Read the Entire Report Please Click on the pdf File Below