We see the PPM money as a short-term tailwind for EUR/SEK, "buy the rumour, sell the fact." We also expect the Riksbank to cut 25bp in December, which could weigh a little further on the SEK, even though most of it is priced in. Hence, the near-term outlook is dominated by upside risks for EUR/SEK and we target EURSEK at 9.75 in one month. However, the medium-term outlook remains constructive for the SEK based on relative monetary policy, relative growth, structural factors and valuation and we therefore see EUR/SEK moving lower in 2013.
New Swedish pension money is disbursed once a year to the funds within the Swedish pension system and has become recurrent end of-the-year flow story in the SEK market. This year the money will be distributed on 10 December. The exact sum will be announced in the coming days/weeks but our guess is that it will be in the neighborhood of last year's SEK32bn.
Some of the pension money is invested in non-domestic funds and under the assumption that part this is being hedged, we estimate that around SEK10bn will hit the SEK. While these transactions are sizeable, game theory and rational expectations suggest that market participants, the investing funds and outsiders, should have learned to pre-trade on this.
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PPM Money Doing The Rounds
Published 11/17/2012, 12:21 AM
Updated 05/14/2017, 06:45 AM
PPM Money Doing The Rounds
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