Background : in December every year, the earned pension rights within the Swedish pension system are disbursed. We expect it to be on Monday the 11th this year. We expect SEK39- 40bn (up from SEK38bn last year) to be invested in the funds totally.
Flows : part of the total amount goes into global funds. We estimate that the total outflow will be around SEK24bn. Under the assumption that 50% of foreign holdings are hedged on average, the SEK flow effect would be around SEK12bn.
SEK effect : we tend to see transitory effects on EUR/SEK around the PPM date. On the next slide, the average effect on EUR/SEK spot and 1Mimplied volatility is illustrated.
Spot : EUR/SEK started to rise two days before the PPM date. It rose on average by 0.7% (roughly seven figures at the current rate). The cross peaked on the PPM date and was back to square one six days later.
Implied volatility : EUR/SEK 1-month implied volatility shows a transitory spike on the PPM date.
Conclusion : if history is any lesson, we could see SEK crosses making a transitory move slightly higher around 11 December. We would not rule out that the move could be higher this year given the current poor SEK sentiment. Note, however, that seasonality suggests that October-November are SEK-negative months and December-January are SEK-positive.
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