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Index-Linked Report: Tap Auction In SGBi3107‏

ByDanske Markets
Published 09/25/2013, 08:00 AM
Updated 05/14/2017, 06:45 AM

Tap auction in SGBi3107. Given the last auction, favourable pricing and this linker bond standing out among the others as being expensive in the repo market, we expect the auction to be well received.The recent tumble in the oil price has compressed BEI rates. However, after altering our inflation forecast accordingly, our assessment is that that the move is overdone.

We still suggest buying short BEIs, as these imply an all-time low CPIF rate over the next few years. Note, however, that longer BEI rates are now also trading at attractive levels. Hence, we advise taking profit on our earlier recommendation for a flatter BEI curve. One way to protect (short) BEIs against declining commodity prices is to do a BEI box versus Europe as the difference in the inflation outlook between the areas is not reflected in the market pricing.

We have received more tentative signs that inflation is slowly and gradually picking up in Sweden. The companies' management expectations of own prices are the highest recorded since the SKOP index started in 2007. In addition, we are more confident that the Riksbank will be on hold for longer and will be 'happy to allow' inflation to rise faster towards the inflation target.

To Read the Entire Report Please Click on the pdf File Below.

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