On Thursday, we have tap auctions in SGBi31112 (1 June 2026) and SGBi3111 (1 June 2032) - SEK700 in the shorter one (SGBi3112) and SEK300m in the other. On Friday and Monday next week, the Swedish Debt Office is due to continue with switch auctions and buy the shortest bond SGB3107 (1 June 2017) and sell the two-year longer bond, SGBi3110 (1 Jun 2019). The switch auction will offer the market the opportunity to sell the shortest bond ahead of the elimination from the real bond index when its remaining life moves below one year. Usually, interest in the bond evaporates after it is excluded from the real bond index and liquidity in the bond deteriorates. We are a bit uncertain about the appetite for the longer bonds in the tap auction. However, with higher oil prices it might turn out to be well bid. At the same time, we expect the switches in the auction SGBi3107/SGBi3110 to run smoothly.
We continue to recommend extensions along the real rate curve (flatteners) ahead of index extensions, Riksbank purchases and good/risk reward in the 5Y segment given the inconsistency in market pricing between nominal and BEI rates.
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