Factors such as index extension, pension flows, and redemptions are expected to support the 10-year segment of the Swedish government bond curve over the next couple of months. Focus will also be on inflation data this week in Sweden. We expect core inflation to be 0.25% below the Riksbank's forecast.
Norges Bank is introducing a new 10-year bond tomorrow (11 March) worth NOK6bn. Long-dated NGBs have already suffered on the surprise announcement so good initial entry levels could be possible for long positions. However, be aware of further taps in this bond over the next couple of quarters. Elsewhere, focus will be on core inflation in Norway which is expected to stay at 2.4% in February. Norway remains one of the few OECD countries not struggling with too low inflation.
The lack of action from the ECB last week put depreciation pressure on DKK. However, we still firmly believe that the number of rate hikes priced in Denmark over the next two years is far too excessive given the strong Danish external balances. Focus will be on inflation this week.
In the FX sphere, we still like the Norwegian krone relative to the Swedish krona. In particular, the SGB flows (due to foreign ownership) could be a headwind together with low inflation to the Swedish krona over the next couple of months. We continue to keep an eye on M&A activity. In general, the lack of ECB action last week put upward pressure on EUR/Scandi crosses as relative rates remain an important FX driver.
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