Investing.com - Financial Markets Worldwide

Riksbank To Out Hike The ECB

ByDanske Markets
Published 09/29/2013, 07:35 AM
Updated 05/14/2017, 06:45 AM

Buy a 1Y1Y SEK payer swaption with strike 2% (20bp above ATMF). Sell a 1Y1Y

EUR payer swaption with strike 0.80% (10bp above ATMF).

The Riksbank in a much stronger position than the ECB. The current 3M fixing spread between SEK and EUR stands at slightly below 100bp. Looking at the 1Y1Y forward segment in each currency, the market expects the spread to widen only marginally to 109bp. In our view, this clearly understates the difference between the position of the Riksbank and of the ECB. With unemployment still standing at over 12% and facing a continued need to consolidate public finances, we find it unlikely that the ECB will allow short rates to rise significantly.

Swedish fundamentals are much more supportive, with unemployment that seems to have peaked earlier than the Riksbank predicted. An inflation rate that is set to rise and continued credit growth. Admittedly, manufacturing and exports have clearly been on the weak side this year and Swedish industrial production has generally underperformed the euro area. To some extent, hard data is also inconsistent with what we have seen in survey data, where indicators have been much more positive. We would be very surprised if Sweden continued to be unable to capitalise on a global recovery.

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

Latest comments

Loading next article…
Install Our App
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.