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Swedish Rate Wrap

Swedish Rate Wrap — September remains in play

Following January's low inflation, the CPIF ended up being marginally closer to the Riksbank's February forecast. We expect inflation to rise in March and the Riksbank's forecast error should completely disappear over the next couple of months. Although the market was disappointed following the January shock, we believe it is warranted to expect a continued rise in inflation ahead.

The market only sees a 35 percent probability of a rate hike in September, but we still believe September remains in play. Consequently, short-term yields should rise and the narrowing of the spread toward Germany should be reversed.

Kiran Sakaria, Junior Strategist |

Swedish Rate Wrap — Headwinds mounting at the Riksbank

As we know, bad news tends not to travel alone. The inflation surprise in January was followed by weaker unit labour costs and continued low wage growth. The market's conclusion is that a repo rate hike will not come until December at the earliest. In this edition of the Swedish Rate Wrap, we review what would have to happen for our forecast of a repo rate hike in September to materialise.

Overall, there is a substantial risk that the Riksbank will ultimately be forced to lower its repo rate path in conjunction with its meeting on April 25, and thus signal a repo rate hike later than in September. However, the fact that the Riksbank opted not to revise its repo rate path in February, despite a lower inflation forecast, indicates a certain willingness to start raising the repo rate.

Claes Måhlén, Chief Strategist |

Swedish Rate Wrap — Rising inflation sets stage for continued pressure on interest rates

Following recent dramatic increases in rates, predominantly in the US, it is fitting to examine how much higher rates can go. Rising inflation and a continued strong economy moving forward indicate a continued upside.

On the domestic front, we conclude that the Riksbank remains on track to hike the repo rate in September, despite a significantly lower inflation forecast. We will also review next week's vital CPI figures, which will set the tone for the entire year.

Claes Måhlén, Chief Strategist |

Swedish Rate Wrap — A roadmap for the Riksbank

In this week's Swedish Rate Wrap, we look at the state of play ahead of the Riksbank's next monetary policy meeting on February 13 (decision to be announced February 14) and we sketch out three scenarios for the timing of the first repo rate hike. Our main scenario is a September increase, which is in line with the Riksbank's rate path.

We also reiterate our recommendations for short durations and forecast continued upward pressure on interest rates on both sides of the Atlantic.


Kiran Sakaria, Junior Strategist |

Swedish Rate Wrap — Winning strategy: short duration

In this week's Rate Wrap, we summarise our outlook on interest rates from our Global Macro Forecast. While we predict a slowdown in the US in 2019, we expect strong global growth to continue for most of 2018, which will influence the fixed income markets in the near term. We believe that short duration will be the winning strategy in this environment.

Kiran Sakaria, Junior Strategist |

Swedish Rate Wrap — Did the Riksbank just extend the QE programme?

Ahead of the Riksbank's decision this week, expectations were relatively consistent: a largely unchanged interest rate path and a terminated QE programme. Early repurchase of maturing bonds was also expected. The moderate market reaction following the decision indicates that the outcome was close to expectations. However, in the last Swedish Rate Wrap for this year, we consider whether in reality, the QE programme has once again been extended.

Claes Måhlén, Chief Strategist |