It is probably no news that we expect a relatively slow rise in inflation going forward and that the repo rate path (Riksbank) must be adjusted down partially in order to avoid the risk of SEK appreciation to an extent that would put downward pressure on imported inflation. Such a policy change is supported by signals of additional steps designed to dampen household debt accumulation. However, this also implies than one cannot rule out the Riksbank will eventually succeed in lifting inflation higher at least above the ultra low levels expressed in longer BEI.
A look at the Riksbank's implicit policy preferences - inflation developments have been weighted up considerably.
Swedish real rates are among the highest (if not the highest) real rates compared with similar countries. We believe the monetary policy conducted by the Riksbank over the past few years is one important factor behind the high real rates and the super low BEI rates. To improve the prospects for moving closer to the inflation rate target over the medium term, the Riksbank needs to alter monetary policy accordingly, so a lower policy rate for a longer period of time. Hence, we believe BEI rates should move higher as a result of lower real rates.
Buy linkers outright, against Bunds in BEI spreads and combine with being long interest rate risk at the front end of the curve. We like FRAMAR15 or receiving SEK 2Y1Y forward.
Higher USD rates - a threat to our spread position versus Germany?
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