Fixed Income Market Watch - Sweden


Sep 29, 2014 - Forecast repo rates given Riba pricing, Riksbank and Danske Bank Markets. Repo Eff. Diff. Danske. Date. Riba. (bp) Riksbank Markets...

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Investment Research

29 September 2014

Fixed Income Market Watch Sweden The Riksbank and Money Market Forecast repo rates given Riba pricing, Riksbank and Danske Bank Markets

Repo Eff. Date 2014-10-29 2014-12-17 2015-02-18 2015-05-06 2015-07-08 2015-09-09 2015-10-28

Riba 0.23 0.2 0.19 0.19 0.21 0.24 0.28

Diff. (bp) -2 -3 -1 0 2 3 4

Danske Riksbank Markets 0.22 0.25 0.22 0.25 0.22 0.25 0.22 0.25 0.24 0.25 0.3 0.25 0.42 0.25

FRA rates 2.50%

Last Year Last Month Now

2.00%

1.50% 1.00% 0.50% years

0.00% 0

0.5

1

1.5

2

Source: Danske Bank Markets

Source: Danske Bank Markets, Sveriges Riksbank

Surprise index

Riba prices and forecasts Riksbank Forecast DM Forecast Riba

1.1 0.9 0.7 0.5 0.3

years

0.1 Source: Macrobond, Danske Bank Markets

0

0.5

1

1.5

2

Source: Danske Bank Markets, Sveriges Riksbank

10-year yield Momentum vs surpise index

Source: Macrobond, Danske Bank Markets

Quant/Strategy Susanne Perneby +46-8-568 805 85 [email protected]

Important disclosures and certifications are contained from page 10 of this report.

www.danskeresearch.com

Fixed Income Market Watch

TED-spread* and the spread between Riba and FRA contracts

Swap rates 3.00%

TED Spread

110 90

Actual Market Implied

2.50%

Last Year Last Month Now

2.00%

70

1.50%

50

1.00%

30

0.50%

10

0.00%

years 1 2 3 4 5 6 7 8 9 10

Source: Danske Bank Markets * Spread between 3M Stibor and a generic 3M point on the Riba-curve Source: Danske Bank Markets

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Fixed Income Market Watch

Nominal Bonds Swedish government bonds Spread Bond

Yield 1 Wk 1 Mth YTD Mrg Rte

vs DE

ASW Carry RD

SGB1049 0.14%

+1.0

+2.0

-68.5

0.14%

21.0

-29.6

0.0

SGB1050 0.15%

-2.0

-2.5

-94.0

0.16%

22.0

-36.2

0.5 0.1

SGB1051 0.30%

-3.5

-2.0

-110.5 0.56%

34.8

-38.0

0.8 1.1

SGB1052 0.57%

-5.5

-1.0

-123.5 1.09%

47.6

-38.7

1.2 1.3

SGB1047 0.91%

-5.0

+3.5 -121.5 1.93%

60.1

-35.1

1.5 1.5

SGB1054 1.15%

-5.5

+6.0 -117.5 2.23%

58.6

-32.9

1.3 1.2

SGB1057 1.35%

-6.0

+8.0 -116.5 2.32%

50.7

-30.4

1.3 0.9

SGB1058 1.49%

-6.5

+9.5

2.56%

46.3

-31.4

1.3 0.8

SGB1056 1.92%

-6.5

+12.5 -110.5 2.71%

23.3

-28.2

1.1 0.4

SGB1053 2.09%

-6.5

+13.0 -116.0 2.88%

26.3

-23.2

1.0 0.2

* Carry & Roll Down (RD) for 1M forward Source: Danske Bank Markets

ASW (bp)

German and Swedish government bonds swapped into 3M Stibor-based cashflow 50 40 30 20 10 0 -10 -20 -30 -40 -50

Swedish Govies German Govies

Years to Maturity 0

5

10

15

20

25

30

35

Source: Danske Bank Markets

Marginal rates* 4.00%

SEGOVT SEKSWAP

3.00%

SHYP1586 SHYP1583

Stadshypotek

2.00%

SHYP1582 SHYP1581

SHYP1580 SHYP1579 SHYP1578 1.00% SHYP1577 SHYP1576 SGB1051 SGB1050 0.00% SGB1049 0 2 4

SGB1058 SGB1054

SGB1057

SGB1047 SGB1052 Years to Maturity 6

8

10

12

* Computed from a zero-coupon curve Source: Danske Bank Markets

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Fixed Income Market Watch

Mortgage bonds

Bond

Cpn

Mat.

Yield 1 Wk 1 Mth YTD Mrg Rte ASW Carry RD

SHYP1576 6.00% ma r-15 0.30%

+1.0

-0.5

-70.5

0.30% -14.0

SHYP1577 6.00% dec-15 0.35%

-1.0

-4.5

-91.0

0.37% -10.9 0.2 0.5

SHYP1578 6.00% s ep-16 0.48%

-1.5

-2.0

-109.5 0.69%

-6.3

0.7 1.4

SHYP1579 6.00% jun-17 0.63%

-3.0

0.0

-127.5 1.07%

-2.5

1.1 1.7

SHYP1580 3.00% ma r-18 0.81%

-4.0

-1.0

-142.5 1.45%

2.2

1.3 1.8

SHYP1581 3.00% dec-18 1.00%

-4.0

-2.0

-148.5 1.97%

8.8

1.5 2.1

SHYP1582 2.50% s ep-19 1.20%

-5.0

-2.0

2.35%

14.7

1.7 2.1

SHYP1583 4.25% jun-20 1.38%

-5.0

-1.0

-149.5 2.88%

20.0

1.8 2.1

SHYP1586 4.50% s ep-22 1.85%

-5.3

-1.3

-142.8 3.28%

33.2

1.9 1.6

SWH182

3.75% ma r-15 0.29%

+0.5

-0.5

-72.0

0.29% -15.5

0.2

SWH183

3.75% s ep-15 0.33%

-1.0

-3.5

-84.0

0.36% -11.7

0.7

SWH184

3.75% jun-16 0.42%

-1.0

-2.5

-104.5 0.54%

-8.2

0.5 1.0

SWH185

3.75% ma r-17 0.56%

-3.0

-1.5

-123.0 0.89%

-4.9

0.9 1.5

SWH186

3.75% dec-17 0.74%

-3.5

0.0

-137.5 1.33%

-0.7

1.2 1.8

SWH187

3.75% s ep-18 0.93%

-4.5

-2.0

-147.5 1.80%

5.6

1.4 2.0

SWH188

3.75% jun-19 1.12%

-5.0

-2.5

2.22%

11.3

1.6 2.0

SWH180

5.70% ma j-20 1.35%

-5.0

-2.0

-150.5 2.84%

18.3

1.8 2.1

NDH5520 3.25% jun-15 0.31%

+0.5

-2.0

-77.5

NDH5527 4.50% jun-16 0.43%

-1.0

-2.5

-104.5 0.51%

-7.7

0.6 1.0

NDH5528 3.00% jun-17 0.63%

-3.0

0.0

-127.5 0.99%

-2.5

1.1 1.6

NDH5529 2.00% jun-18 0.88%

-4.0

-1.5

-144.5 1.58%

5.4

1.4 2.0

NDH5530 2.25% jun-19 1.13%

-5.0

-2.0

2.10%

12.3

1.6 2.0

NDH5521 3.25% jun-20 1.38%

-5.0

-1.0

-149.5 2.75%

20.0

1.8 2.1

SEB568

4.00% jun-15 0.31%

+0.5

-2.0

-77.5

SEB569

4.25% jun-16 0.43%

-1.0

-2.5

-104.5 0.51%

-7.7

0.6 1.0

SEB570

3.00% jun-17 0.63%

-3.0

0.0

-127.5 0.99%

-2.5

1.1 1.6

SEB571

3.00% jun-18 0.88%

-4.0

-1.5

-144.5 1.60%

5.4

1.4 2.0

SEB572

3.00% jun-19 1.13%

-5.0

-2.0

2.11%

12.3

1.6 2.0

LFH510

2.25% jun-15 0.31%

+0.5

-2.0

-77.5

0.31% -13.3

0.1

LFH508

4.00% ma r-16 0.38%

-1.5

-2.5

-100.0 0.45%

-9.4

0.4 0.8

LFH507

4.50% jun-17 0.65%

-3.5

-1.0

-129.5 0.98%

-0.5

1.1 1.7

LFH511

2.50% jun-18 0.89%

-4.5

-2.5

-147.5 1.57%

6.4

1.4 1.9

LFH512

2.50% jun-19 1.14%

-5.5

-3.0

-153.5 2.11%

13.3

1.6 2.0

LFH513

3.25% s ep-20 1.45%

-5.0

-0.5

-151.5 2.77%

22.2

1.8 2.0

SCBC127

4.00% a pr-15 0.30%

+0.5

-1.5

-73.0

0.30% -14.3

0.1

SCBC131

4.00% nov-15 0.35%

-0.5

-4.5

-88.0

0.39% -10.2 0.2 0.6

SCBC132

4.00% s ep-16 0.47%

-1.5

-2.0

-109.5 0.63%

-7.3

0.7 1.2

SCBC133

4.00% jun-17 0.62%

-3.0

-0.5

-128.0 1.03%

-4.0

1.0 1.6

SCBC134

4.00% ma r-18 0.79%

-4.0

-1.0

-143.0 1.47%

0.7

1.3 1.9

SCBC139

4.00% dec-18 0.99%

-4.0

-2.0

-149.0 1.97%

7.3

1.5 2.1

SCBC140

4.00% s ep-19 1.19%

-5.0

-1.5

2.43%

13.7

1.7 2.1

0.31% -13.3

0.31% -13.3

0.2

0.1

0.1

* Carry & Roll Down (RD) for 1M forward Source: Danske Bank Markets

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Fixed Income Market Watch

Top 5 monthly winners Bond

Top 5 monthly losers bp

Bond

bp

SHYP1577 dec-15 6.00%

-4.5

SGB1053 ma r-39 3.50%

13.0

SCBC131

nov-15 4.00%

-4.5

SGB1056

jun-32 2.25%

12.5

SWH183

s ep-15 3.75%

-3.5

SGB1058

ma j-25 2.50%

9.5

LFH512

jun-19 2.50%

-3.0

SGB1057

nov-23 1.50%

8.0

LFH508

ma r-16 4.00%

-2.5

SGB1054

jun-22 3.50%

6.0

Source: Danske Bank Markets

Source: Danske Bank Markets

Top 5 largest z-score*

Top 5 yield volatility

Bond SGB1051

Z-Score

Bond

bp/day

a ug-17 3.75%

-1.3

SHYP1586 s ep-22 4.50%

3.4

SGB1052 ma r-19 4.25%

-1.3

SHYP1583 jun-20 4.25%

3.2

SHYP1586 s ep-22 4.50%

-1.3

NDH5521

jun-20 3.25%

3.2

SGB1050

jul -16 3.00%

-1.2

NDH5530

jun-19 2.25%

3.2

LFH512

jun-19 2.50%

-1.2

SEB572

jun-19 3.00%

3.2

* Std from 3M mean

Period: past month

Source: Danske Bank Markets

Source: Danske Bank Markets

Top 5 ASW

Top 5 ASW losers

Bond

bp

Bond

bp

SHYP1586 s ep-22 4.50%

41.0

SGB1049

a ug-15 4.50%

4.2

SWH180

ma j-20 5.70%

25.4

SHYP1579 jun-17 6.00%

1.1

LFH513

s ep-20 3.25%

25.3

NDH5528

jun-17 3.00%

1.0

SHYP1583 jun-20 4.25%

24.8

SEB570

jun-17 3.00%

1.0

NDH5521

23.0

SCBC133

jun-17 4.00%

0.5

jun-20 3.25%

* Change during past month

* Change during past month

Source: Danske Bank Markets

Source: Danske Bank Markets

Top 5 Winner Total Return

Top 5 Losers Total Return

Bond

YTD

Bond

YTD

SGB1053 ma r-39 3.50% 23.95%

SHYP1576 ma r-15 6.00%

1.06%

SGB1056

jun-32 2.25% 19.54%

SWH182

ma r-15 3.75%

1.08%

SHYP1586 s ep-22 4.50% 12.58%

SCBC127

a pr-15 4.00%

1.15%

SGB1057

nov-23 1.50% 12.38%

SGB1049

a ug-15 4.50%

1.19%

LFH513

s ep-20 3.25% 10.78%

SEB568

jun-15 4.00%

1.34%

Period: YTD

Period: YTD

Source: Danske Bank Markets

Source: Danske Bank Markets

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Fixed Income Market Watch

Top 5 Carry & Roll Down, maturity<3Y Bond

Top 5 Carry & Roll Down, maturity>3Y

Carry RD Repo

LFH507

Bond

Carry RD Repo

jun-17 4.50% 1.1 1.7 0.31%

SWH180 ma j-20 5.70% 1.8 2.1 0.30%

SHYP1579 jun-17 6.00% 1.1 1.7 0.31%

SHYP1583 jun-20 4.25% 1.8 2.1 0.30%

SEB570

NDH5521 jun-20 3.25% 1.8 2.1 0.30%

jun-17 3.00% 1.1 1.6 0.31%

NDH5528 jun-17 3.00% 1.1 1.6 0.31%

LFH513

SCBC133 jun-17 4.00% 1.0 1.6 0.31%

s ep-20 3.25% 1.8 2.0 0.30%

SCBC140 s ep-19 4.00% 1.7 2.1 0.30%

Period: 1M forward

Period 1M forward

Source: Danske Bank Markets

Source: Danske Bank Markets

2Y spread vs SGB1050

5Y spread vs SGB1052

Bond

bp 1 Week 1 Month YTD

Bond

bp 1 Week 1 Month YTD

SHYP1578 s ep-16 6.00% 33

+0.50

+0.5

-15.5

SHYP1582 s ep-19 2.50% 63

+0.5

-1.0

SWH185

ma r-17 3.75% 41

-1.00

+1.0

-29.0

SWH188

jun-19 3.75% 55

+0.5

-1.5

NDH5527

jun-16 4.50% 28

+1.00

0.0

-10.5

NDH5530

jun-19 2.25% 56

+0.5

-1.0

SEB569

jun-16 4.25% 28

+1.00

0.0

-10.5

SEB572

jun-19 3.00% 56

+0.5

-1.0

LFH508

ma r-16 4.00% 23

+0.50

-0.0

-6.0

LFH512

jun-19 2.50% 57

+0.0

-2.0

SCBC132

s ep-16 4.00% 32

+0.50

+0.5

-15.5

SCBC140

s ep-19 4.00% 62

+0.5

-0.5

Source: Danske Bank Markets

-30.0

Source: Danske Bank Markets

Swedish mortgage vs government bonds 80

Spread vs Govies (bp)

70 60 50

40 30 20

Stadshypotek

Swedbank Hypotek

Nordea Hypotek

SEB

LF Hypotek

SCBC

10 0

1

2

3

4

5

6

7 Years to Maturity

* Computed spread is based on a zero-coupon based government curve Source: Danske Bank Markets

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Fixed Income Market Watch

Historic slop and curvature of Swap term-structure 235

10-2y

5-2y

5 - 2/10y

bp

185 135 85 35 -15 -65

Source: Danske Bank Markets

Swap spread vs government bonds Bond

Swap spread vs EUR swaps

bp 1 Week 1 Month YTD

Bond

bp 1 Week 1 Month YTD

SGB1050

jul -16 3.00% -36

-0.4

-0.8

-2.3

SWAP2Y

okt-16 0.54% 34

-89.3

+6.5

-40.3

SGB1052

ma r-19 4.25% -39

-0.0

-2.1

+3.4

SWAP5Y

okt-19 1.06% 59

-2.9

+8.4

-31.8

SGB1058

ma j-25 2.50% -31

+1.5

+0.1

SWAP10Y

okt-24 1.75% 59

-2.3

+4.0

-9.7

Source: Danske Bank Markets

Source: Danske Bank Markets

Forward swap rates 6.00

Swap 1Y1Y

5.00

Swap 2Y2Y

Swap 5Y5Y

4.00 Rate

3.00 2.00 1.00 0.00

Source: Bloomberg, Danske Bank Markets

Forward swap spread vs euro 150

SW vs EU Swap 1Y1Y

SW vs EU Swap 2Y2Y

SW vs EU Swap 5Y5Y

Spread (bp)

100

50 0 -50

-100

Source: Bloomberg, Danske Bank Markets

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Fixed Income Market Watch

Inflation-Linked Bonds Swedish inflation-linked bonds

Bond

Cpn

Mat.

Yield 1 Week 1 Mth YTD Z-Cpn BEI CPI Delta Mrg Rte Nom. Bond BEI vs Nom Sprd vs DE

SGB3105 3.50% dec-15 -0.64%

-3.5

-18.5

-72.5

0.78%

8.78

-0.63%

SGB1049

0.78%

-32.9

SGB3107 0.50% jun-17 -0.79%

-5.0

-13.5

-98.5

1.06%

3.74

-0.79%

SGB1051

1.09%

-27.8

SGB3102 4.00% dec-20 -0.47%

-7.5

-10.5 -113.0

1.41%

1.80

-0.45%

SGB1047

1.38%

20.1

SGB3108 0.25% jun-22 -0.33%

-7.0

-6.5

1.54%

1.31

-0.33%

SGB1054

1.48%

21.1

SGB3109 1.00% jun-25 -0.17%

-7.5

-7.0

1.71%

0.98

-0.15%

SGB1058

1.65%

18.1

SGB3104 3.50% dec-28 -0.03%

-7.0

-5.6

1.80%

0.85

0.02%

SGB1057

1.38%

13.0

-113.0 -110.5

Source: Danske Bank Markets

Swedish CPI and forecast

BEI* Spreads in Sweden and Germany

CPI YoY Danske Bank Markets CPI Forecast YoY

5.0% 4.0%

2.00%

Sweden

1.75%

Germany

1.50%

3.0%

1.25%

2.0%

1.00%

1.0% 0.0%

0.75%

-1.0%

0.50%

-2.0%

0.25%

Years to Maturity

0.00% 0

5

10

15

* Zero-coupon based generic BEIs

Source: Danske Bank Markets

Source: Danske Bank Markets

Carry @ 0.25% Repo

Bond SGB3105 SGB3107 SGB3102 SGB3108 SGB3109 SGB3104

Forward BEI @ 0.25% Repo

1M -14.4 -6.4 -2.5 -1.7 -1.1 -0.9

3M 19.0 5.4 4.0 3.4 2.9 2.8

6M -48.3 -18.5 -4.6 -2.4 -0.9 -0.2

Bond SGB3105 SGB3107 SGB3102 SGB3108 SGB3109 SGB3104

1M 0.91% 1.15% 1.41% 1.51% 1.67% 1.40%

* Based on Danske Bank Markets CPI forecast

* Based on Danske Bank Markets CPI forecast

Source: Danske Bank Markets

Source: Danske Bank Markets

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29 September 2014

3M 0.54% 1.04% 1.37% 1.48% 1.66% 1.39%

6M 1.10% 1.28% 1.49% 1.58% 1.73% 1.45%

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Fixed Income Market Watch

Asset and Position Correlations Top 10 correlations vs 10Y yld

Top 10 negative corr. vs 10Y yld

Asset Correlation 5Y SEGOVT 0.87 Slope 0.82 DE 10Y 0.75 Norway 10Y 0.73 USDJPY 0.66 2Y SEGOVT 0.66 US 10Y 0.65 UK 10Y 0.48 ICE Libor USD 3M 0.35 LIBOR3M 0.21

Asset AUDSEK NOKSEK WTI Oil Gold Euribor 3M GBPSEK Copper Curvature USDSEK EURSEK

Correlation -0.56 -0.42 -0.42 -0.36 -0.34 -0.30 -0.25 -0.20 -0.16 -0.12

* Weekly data, 24 weeks window

* Weekly data, 24 weeks window

Source: Bloomberg, Danske Bank Markets

Source: Blomberg, Danske Bank Markets

Correlations between the yield of 10Y generic Swedish government bond and other assets and indices 1.10

Slope

Curvature

DE 10Y

US 10Y

WTI Oil

OMX30

Gold

1.00

0.90 0.80 0.70 0.60

0.50

Correlation

0.40 0.30 0.20

0.10 0.00 -0.10 -0.20 -0.30 -0.40 -0.50 -0.60 -0.70 -0.80

* Correlation sare computed from weekly data and a 24-week rolling window of log-returns Source: Bloomberg, Danske Bank Markets

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Fixed Income Market Watch

Disclosure This research report has been prepared by Danske Bank Markets, a division of Danske Bank A/S (‘Danske Bank’). The author of this research report is Susanne Perneby, Quant/Strategy analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst’s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. The research reports of Danske Bank are prepared in accordance with the Danish Society of Financial Analysts’ rules of ethics and the recommendations of the Danish Securities Dealers Association.. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of highquality research based on research objectivity and independence. These procedures are documented in Danske Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank’s Research Departments are organised independently from and do not report to other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors upon request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. Date of first publication See the front page of this research report for the date of first publication.

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Fixed Income Market Watch

undertake to notify any recipient of this research report of any such change nor of any other changes related to the information provided in this research report. This research report is not intended for retail customers in the United Kingdom or the United States. This research report is protected by copyright and is intended solely for the designated addressee. It may not be reproduced or distributed, in whole or in part, by any recipient for any purpose without Danske Bank’s prior written consent.

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