We argue that the SNB's cap removal makes it even more unlikely that the Riksbank would embark on FX intervention as a monetary policy tool.
We have long argued that the Swedish curve 5/10y will flatten and we have now reached our profit level at 45bp. However, we believe the trade has more to offer.
December unemployment should behave well and not cause any disruptions. We expect trend and seasonally adjusted unemployment both to print 7.9%. It basically means the unemployment rate continues to move sideways.
The Norwegian debt Office (Norges Bank) will be tapping the market this week. We believe the tap will be NOK3bn in the 3.75% May-21 bond, but the official announcement will not be out before Monday. We still see value in NGBs, and the outlook for the NOK seems to have improved recently.
We believe that the SNB move and the expected ECB QE programme this week will fuel inflows into Danish markets, and that global investors will now look for countries where more rate cuts can be priced in. We recommend to receive 2Y DKK versus 3s, 1Y forward and to buy Danish non-callable 2% 2018 and 2% 2020 Jan.
Given the post SNB downward pressure on EUR/DKK, we find it very likely that a 10bp Danish rate cut will be announced after the ECB announcement on Thursday. The Danish central bank normally announce rate changes on Thursdays at 16:00 CET.
The Danish debt Office has also decided to take advantage of the very strong demand for duration that has pushed 20 and 30y yields to record lows. Hence, the taps will be in the 1.75% Nov-2025 and the 4.5% Nov-39. We see most interest for the 10y tap.
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