Swedish CPI preview and index-linked bonds
We expect that CPI will decrease by 0.3% in July corresponding to a y/y inflation rate of 0.7%.
Record low electricity prices are holding Swedish inflation down while food prices are continuing to rise. Although the strong Swedish Krona is a force for lower inflation, we fail to see any obvious impact on the shape of the real rate yield curve.
Given the ultra-flat Swedish yield curve, both compared to international and nominal curves, we like short-term linkers better than long term.
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• Fannie Mae and Freddie Mac to be dismantled • Chinese central bank ready to lower bank reserves
In the Nordic region Sweden appears to be best positioned for substantial progress over the coming years. Denmark and Finland are both in for a moderate recovery while the Norwegian economy dampens significantly after years of high growth.
German and US yields with limited changes yesterday – bonds to find support today. Portuguese bonds continue to rally. Equities facing some pressure again. ECB not happy with last week’s market reaction. Swift implementation of the Single Resolution Mechanism still faces big obstacles. New Belgian bond finding good demand. Euro-zone industrial production and ECB speeches ahead. German and US auction on the agenda.
The latest Euro Rates Update is now available
Instant view CPIF-inflation stood at 0.4% y/y in February, as expected. The deviation from the Riksbank’s forecast thus narrowed to 0.1% point, from 0.3% point in January.
• February inflation spot on our forecast • The difference versus the Riksbank’s CPIF forecast narrows to 0.1% point in February. This was the last inflation print before April meeting. • Together with strong Q4 GDP this clearly supports Riksbank on hold in April.
• Dijsselbloem confirms progress on bank resolution • Important Swedish inflation figures for February
An increase in riskaversion with less demand for credits could lead to an increase in the demand for covereds. This would be quite contrary to the behavior of covered bond spreads historically but might be the consequence of the current positioning.
The BoJ kept its policy unchanged today and the positive growth outlook. We expect the bank to stay put until August-September, when consumption tax hike related impacts on Q2 GDP becomes known. We have revised our growth and JPY forecasts slightly, which will be published in the March Economic Outlook on the 12 March.
Bonds performed yesterday – near-term upside potential in yields limited. US equities facing resistance around record-highs. Chinese equities continued to see clear pressure. German banks win concessions in the ECB’s AQR. Rather light calendar. Belgium announces a new 20Y bond –Dutch, German and US auctions on the agenda.
RT @alkd1976: @SuviKosonen @views_amit wasnt there a similar chart pattern on the S&P in 2008 right before lehman? i remember seeing one of…
RT @sharmaanay: @SuviKosonen This seems to be animal from ‘Riddick’. Not camel for sure. :))
RT @views_amit: @alkd1976 @SuviKosonen pattern seems interesting. U would see similar pattern in shanghai