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Strong Swedish PMI Supports Stronger SEK

ByDanske Markets
Published 10/07/2013, 07:38 AM
Updated 05/14/2017, 06:45 AM
EUR/NOK
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It is time for inflation data in both Denmark, Norway and Sweden and with less focus on macro-prudential issues at the Riksbank, and core inflation at 2.5% in Norway market focus is higher than has been the case over the last couple of years.

A strong Swedish PMI is, on the one hand, supporting our call for a stronger SEK, but recent less hawkish comments from the Riksbank have, on the other hand, weighed negatively on the SEK.

Trading wise, last week we recommended to receive SEK swaps 5y 10y fwd against NOK 5y 10y fwd.

Norges Bank announced on 30 September that the planned issuance for Q4 13 will be in the range NOK8-12bn, revised down from a level of NOK18bn. With five auctions left for the year, this implies an average amount of NOK2bn per auction, which is low. We see this as an important catalyst for Norwegian government bonds to richen up again. Norges Bank is this week tapping NOK2bn in its 10Y bond (maturity 24 May 2023), and we think the entry level is attractive.

The DGB spread to Germany is currently at an attractive level and we recommend buying the DGBs prior to the substantial coupons and redemptions that will be returned to investors during Q4.

The Norwegian FX market is still characterised by very poor liquidity and erratic moves. Hence, a further move higher in EUR/NOK should certainly not be ruled out. But, when the volatility eventually drops, we still argue that EUR/NOK will drop to a lower level - especially if our macro economists are correct in predicting a higher growth rate in Q4 13 and in 2014.

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

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