New research from Danske Bank Markets
The Riksbank made a significant move in July, partly as actual inflation had undershot the target heavily for too long and partly because the inflation outcome almost systematically turned out lower than expected. Hence, we expect no change from the Riksbank this week despite the new rhetoric from Draghi and the weaker growth outlook for Sweden.
Sweden is tapping the 5Y and 10Y. Sweden has performed very strongly over the last week, probably to some extent driven by the need for duration in the pension funds and on the back of renewed calls for further Riksbank easing. We expect good demand at the two auctions also given the limited issuance size and the general search for yield in both the Swedish and the global fixed income market.
In Norway we argue that the underperformance for NGBs has now come to an end and that the current spreads to Germany have once again become attractive. Therefore, we recommend buying 3% NGB MAR '24 against 1.75% DBR Feb '24 at 137bp either in the market or at the auction next week, where Norges Bank will tap a modest NOK2bn in the bond.
The most important economic data in Norway this week, indeed this month, is the oil investment figures for August. May's figures revealed that oil company investment plans for next year are significantly lower than this year, which prompted Norges Bank to float the idea of a rate cut again. Hence, the new figures will be very important ahead of the next interest rate meeting on 18 September.
In Denmark Nationalbanken will release its August currency reserves data for August. Given the recent drop in EUR/DKK, the numbers will attract more attention that normally.
Denmark will be tapping the Nov-25 and the Nov-39 this week. The spread versus Germany in the 10Y benchmark is looking attractive ahead of the coupon and redemptions in Q4. Denmark has historically performed well during Q4 and we expect this year to be no different.
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