New research from Danske Bank Markets
New lows in bond yields. We list a few factors that we believe will be an obstacle for considerably higher interest rates in the autumn. For instance, growth disappoints (yet again), TLTROs and mounting speculation about QE from the ECB.
Portfolio allocation - stable interest rates with downside risk. We have a hard time seeing yields trading considerably higher in the autumn, so keep our bias for long duration relative to the bond index. It would be profitable even if rates remained close to current levels, as the duration deviation aims to improve the portfolio yield.
This week we have taken profit in two recommendations and added three new ones (see below). We believe Swedish short swap rates appear attractive relative to the NOK. Swedish linkers with shorter maturities look expensive compared with German ones and there is also room to flatten the Swedish real rate curve.
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