FI, FX & Commodity Strategy

Swedish Rate Wrap — Decisive week approaching

A Riksbank board meeting is approaching, one that is unusually intriguing, in our eyes. It also comes just days before an unusually uncertain Riksdag election (see our analysis in Kronbladet, with the FX Pilot). The Riksbank's meeting will be crucial for the fixed income market. We expect the Executive Board to repeat its message from July and to signal a repo rate rise toward the end of the year. We also summarise the yield forecasts from our most recent Macro Forecast and compare those with market pricing.

FX Pilot — Shaky krona ahead of election and next Riksbank meeting

• Expectations for the Riksbank have fallen compared to those for the ECB, weakening the krona
• Concerns about Turkey lead to stronger Swiss franc and yen
• Fed predicts more rate rises, despite criticism from President Trump
• In focus: Groundless Swexit concerns weaken krona ahead of election

Trump holds the key for commodities —

In a summer when investors have been caught off guard by everything from emerging market woes and the dollar's tailwind to a brewing trade war, commodity markets have once again appeared in the crosshairs in terms of market turbulence. This time, it is not China, OPEC or oil which are central to crisis, but rather it is the USD-financed emerging markets and their mined metal and soft commodity production. We do not think the emerging markets crisis will be a China crisis and we believe that copper and zinc are set to rebound.

Swedish Rate Wrap — Will CPIF win the index battle at the Riksbank?

Which inflation measure it is that sets the tone for monetary policy will be decisive for our view of the Riksbank during the rest of the year. While inflation measured in terms of the target variable, CPIF, remains above the inflation target, CPIF excluding energy is again slightly below the Riksbank's forecast. We expect the levels of both variables to be sufficiently high for a repo rate hike to occur in December, but underlying inflation must not weaken any further in comparison with our forecast. We do not expect a major review of monetary policy in conjunction with the Riksbank Board's September meeting, with the possible exception of a slight reduction in the likelihood of an October rate hike.

FI Comment — Bond index changes, August 2018

1. No major changes in duration
2. Included bonds: LH518
3. Indices will rebalance 2018-08-07

FI Comment — Bond index changes, July 2018

1. No major changes in duration
2. Included bonds: K2505
3. Indices will rebalance 2018-07-06