Investment Research 3 February 2014 Sweden The Riksbank and the money market Forecast repo rates given Riba pricing, Riksbank and Danske Bank Markets Repo Eff. Date Riba Diff. (bp) Riksbank Danske Markets 2014-02-19 0.75 0 0.71 0.75 2014-04-16 0.73-2 0.71 0.75 2014-07-09 0.71-2 0.71 0.75 2014-09-10 0.72 1 0.71 0.75 2014-10-29 0.76 4 0.71 0.75 2014-12-17 0.82 6 0.71 0.75 2015-02-18 0.90 8 1.10 1.00 FRA rates 1.90% 1.70% 1.50% 1.30% 1.10% 0.90% 0.70% years 0 0.5 1 1.5 2 Last Year Last Month Now Surprise index Riba prices and forecasts 1.60 1.50 1.40 1.30 1.20 1.10 1.00 0.90 0.80 0.70 Riksbank Forecast DM Forecast Riba years 0 0.5 1 1.5 Source: Macrobond, Danske Bank Markets 10-year yield momentum vs surprise index Source: Macrobond, Danske Bank Markets Quant/Strategy Susanne Perneby +46-8-568 805 85 supe@danskebank.se Important disclosures and certifications are contained from page 10 of this report. www.danskeresearch.com
TED Spread TED-spread* and the spread between Riba and FRA contracts 110 90 70 50 30 10 Actual Market Implied Swap rates 3.40% 2.90% 2.40% 1.90% 1.40% Last Year Last Month Now 0.90% years 1 2 3 4 5 6 7 8 9 10 * Spread between 3M Stibor and a generic 3M point on the Riba-curve Technical chart of the week Looking for downward movements in a trending market should be done with caution but if one wants to try it, now is a good opportunity. The chart shows the generic Euro Bund Futures. 2 3 February 2014 www.danskeresearch.com
ASW (bp) Nominal bonds Swedish government bonds Yield 1 Week 1 Mth YTD Mrg Rate Spread vs DE ASW Carry SGB1041 0.72% 0.0-1.0-1.0 0.72% 52-23 -2.0 SGB1049 0.72% -2.5-10.5-11.0 0.72% 52-37 0.9-0.4 SGB1050 0.97% -4.0-12.5-13.0 1.39% 76-36 1.4 1.7 SGB1051 1.21% -5.5-19.5-19.0 1.79% 91-42 1.7 1.4 SGB1052 1.54% -6.5-26.5-26.0 2.35% 88-46 1.9 1.3 SGB1047 1.85% -6.5-27.5-26.5 2.95% 87-45 1.8 1.2 SGB1054 2.05% -6.5-27.5-26.5 3.03% 75-42 1.7 0.7 SGB1057 2.22% -6.5-29.5-28.5 3.06% 59-38 1.5 0.5 SGB1058 2.32% +3.0 3.24% 51-38 1.5 0.4 SGB1056 2.74% -5.0-28.5-27.5 3.57% 32-19 1.2 0.3 * Carry and roll down (RD) for 1M forward RD German and Swedish government bonds swapped into 3M Stibor-based cash flow 40 30 20 10 0-10 -20 Swedish Govies -30 German Govies -40-50 Years to Maturity 0 5 10 15 20 25 30 35 Marginal rates* 4.40% SEGOVT SEKSWAP SHYP1579 3.40% Stadshypotek SHYP1578 SGB1056 SHYP1577 SGB1047 SGB1054 SGB1057 2.40% SHYP1576 SGB1052 SHYP1575 SGB1051 1.40% SHYP1574 SGB1050 SGB1041 SGB1049 Years to Maturity 0.40% 0 2 4 6 8 10 12 * Computed from a zero-coupon curve SHYP1583 SHYP1580 SHYP1586 3 3 February 2014 www.danskeresearch.com
Mortgage bonds Cpn Mat. Yield 1 Wk 1 Mth YTD Mrg Rte ASW Carry RD SHYP1575 6.00% jun-14 0.85% +0.5-1.5-1.5 0.85% -8.1-1.6 SHYP1576 6.00% mar-15 0.96% +1.5-5.0-5.5 1.01% -3.9 1.5 0.4 SHYP1577 6.00% dec-15 1.21% -1.5-5.0-5.5 1.60% 3.7 2.1 2.1 SHYP1578 6.00% sep-16 1.49% -2.0-8.0-8.0 2.24% 11.2 2.5 2.4 SHYP1579 6.00% jun-17 1.76% -3.5-15.0-14.5 2.78% 17.0 2.8 2.3 SHYP1580 3.00% mar-18 2.03% -4.0-20.5-20.0 3.24% 24.8 2.8 2.2 SHYP1581 3.00% dec-18 2.29% -4.0-20.0-19.5 3.85% 33.8 2.8 2.3 SHYP1583 4.25% jun-20 2.70% -3.5-18.0-17.0 4.30% 47.3 2.9 1.8 SHYP1586 4.50% sep-22 3.06% -3.5-22.5-21.0 4.31% 55.4 2.7 0.9 SWH166 6.75% maj-14 0.83% 0.0-2.0-2.0 0.83% -11.3-2.3 SWH182 3.75% mar-15 0.95% +1.5-6.0-6.5 0.98% -4.9 1.4 0.2 SWH183 3.75% sep-15 1.12% -0.5-5.0-5.5 1.51% 1.0 1.9 2.1 SWH184 3.75% jun-16 1.40% -1.0-6.5-6.5 2.05% 9.7 2.4 2.5 SWH185 3.75% mar-17 1.66% -3.5-13.5-13.0 2.51% 14.4 2.6 2.2 SWH186 3.75% dec-17 1.93% -4.0-18.0-17.5 3.14% 21.4 2.7 2.4 SWH187 3.75% sep-18 2.21% -4.0-19.5-19.0 3.77% 31.2 2.8 2.5 SWH180 5.70% maj-20 2.68% -3.5-17.5-16.5 4.32% 46.8 3.0 1.9 NDH5526 4.00% jun-14 0.85% +0.5-1.5-1.5 0.85% -8.1-1.6 NDH5520 3.25% jun-15 1.04% +1.0-4.0-4.5 1.11% -0.6 1.7 0.9 NDH5527 4.50% jun-16 1.40% -1.5-7.0-7.0 1.92% 9.7 2.4 2.3 NDH5528 3.00% jun-17 1.76% -3.5-15.0-14.5 2.62% 17.0 2.6 2.3 NDH5529 2.00% jun-18 2.13% -4.0-20.0-19.5 3.42% 28.9 2.8 2.4 NDH5521 3.25% jun-20 2.70% -3.5-18.0-17.0 4.13% 47.3 2.9 1.9 SEB567 4.50% jun-14 0.85% +0.5-1.5-1.5 0.85% -8.1-1.6 SEB568 4.00% jun-15 1.04% +1.0-4.0-4.5 1.11% -0.6 1.8 0.9 SEB569 4.25% jun-16 1.40% -1.5-7.0-7.0 1.92% 9.7 2.4 2.3 SEB570 3.00% jun-17 1.76% -3.5-15.0-14.5 2.62% 17.0 2.6 2.3 SEB571 3.00% jun-18 2.13% -4.0-20.0-19.5 3.47% 28.9 2.8 2.5 LFH506 4.50% maj-14 0.84% 0.0-2.0-2.0 0.84% -10.3-2.4 LFH510 2.25% jun-15 1.04% +1.0-4.0-4.5 1.08% -0.6 1.7 0.7 LFH508 4.00% mar-16 1.31% -1.5-7.5-7.5 1.81% 7.2 2.3 2.2 LFH507 4.50% jun-17 1.80% -3.5-15.0-14.5 2.68% 21.0 2.8 2.5 LFH511 2.50% jun-18 2.17% -4.0-20.0-19.5 3.45% 32.9 2.9 2.4 SCBC126 4.00% apr-14 0.84% 0.0-2.5-2.5 0.84% -6.5-3.9 SCBC127 4.00% apr-15 0.99% +1.5-4.5-5.0 1.01% -2.7 1.7 0.3 SCBC131 4.00% nov-15 1.18% -1.0-5.0-5.5 1.57% 2.4 2.0 1.9 SCBC132 4.00% sep-16 1.48% -2.0-8.0-8.0 2.16% 10.2 2.4 2.4 SCBC133 4.00% jun-17 1.75% -3.5-15.0-14.5 2.74% 16.0 2.6 2.3 SCBC134 4.00% mar-18 2.02% -4.0-20.5-20.0 3.34% 23.8 2.8 2.4 SCBC139 4.00% dec-18 2.27% -4.5-20.5-20.0 3.83% 32.3 2.8 2.3 * Carry and roll down (RD) for 1M forward 4 3 February 2014 www.danskeresearch.com
Top 5 monthly winners Top 5 monthly losers bp bp SGB1053 mar-39 3.50% -34.0 SGB1041 maj-14 6.75% -1.0 SGB1057 nov-23 1.50% -29.5 SHYP1575 jun-14 6.00% -1.5 SGB1056 jun-32 2.25% -28.5 NDH5526 jun-14 4.00% -1.5 SGB1054 jun-22 3.50% -27.5 SEB567 jun-14 4.50% -1.5 SGB1047 dec-20 5.00% -27.5 SWH166 maj-14 6.75% -2.0 Top 5 largest z-score* Z-Score SGB1051 aug-17 3.75% -1.79 SGB1052 mar-19 4.25% -1.60 SGB1050 jul-16 3.00% -1.50 SGB1057 nov-23 1.50% -1.48 SGB1049 aug-15 4.50% -1.47 * Standard deviation from 3M mean Top 5 yield volatility bp/day SGB1058 maj-25 2.50% 6.8 SGB1057 nov-23 1.50% 2.9 SGB1054 jun-22 3.50% 2.9 SGB1056 jun-32 2.25% 2.8 SGB1052 mar-19 4.25% 2.8 Period: past month Top 5 ASW* bp SHYP1586 sep-22 4.50% 61.0 SWH180 maj-20 5.70% 56.0 SHYP1583 jun-20 4.25% 51.7 NDH5521 jun-20 3.25% 48.3 SCBC139 dec-18 4.00% 35.5 * Change over past month Top 5 ASW losers* bp SGB1041 maj-14 6.75% 11.4 SCBC126 apr-14 4.00% 11.1 SWH166 maj-14 6.75% 10.7 SHYP1575 jun-14 6.00% 10.2 SWH180 maj-20 5.70% 8.1 * Change over past month Top 5 winners total return YTD SGB1053 mar-39 3.50% 6.45% SGB1056 jun-32 2.25% 4.72% SGB1057 nov-23 1.50% 3.06% SGB1054 jun-22 3.50% 2.31% SHYP1586 sep-22 4.50% 1.96% Period: YTD Top 5 losers total return YTD SGB1041 maj-14 6.75% 0.07% SWH166 maj-14 6.75% 0.09% SCBC126 apr-14 4.00% 0.09% NDH5526 jun-14 4.00% 0.09% LFH506 maj-14 4.50% 0.09% Period: YTD 5 3 February 2014 www.danskeresearch.com
Spread vs Govies (bp) Top 5 carry and roll down, maturity <3Y Top 5 carry and roll down, maturity >3Y Carry RD Repo SHYP1578 sep-16 6.00% 2.5 2.4 0.83% SWH184 jun-16 3.75% 2.4 2.5 0.83% SCBC132 sep-16 4.00% 2.4 2.4 0.83% NDH5527 jun-16 4.50% 2.4 2.3 0.83% SEB569 jun-16 4.25% 2.4 2.3 0.83% Period: 1M forward Carry RD Repo LFH507 jun-17 4.50% 2.8 2.5 0.83% SWH187 sep-18 3.75% 2.8 2.5 0.83% SEB571 jun-18 3.00% 2.8 2.5 0.83% LFH511 jun-18 2.50% 2.9 2.4 0.83% NDH5529 jun-18 2.00% 2.8 2.4 0.83% Period 1M forward 2Y spread vs SGB1050 5Y spread vs SGB1052 bp 1 Week 1 Month YTD SHYP1577 dec-15 6.00% 24 +2.5 +7.5 +7.5 SWH184 jun-16 3.75% 44 +3.0 +6.0 +6.5 NDH5527 jun-16 4.50% 44 +2.5 +5.5 +6.0 SEB569 jun-16 4.25% 44 +2.5 +5.5 +6.0 LFH508 mar-16 4.00% 34 +2.5 +5.0 +5.5 SCBC131 nov-15 4.00% 21 +3.0 +7.5 +7.5 bp 1 Week 1 Month YTD SHYP1581 dec-18 3.00% 75 +2.5 +6.5 +6.5 SWH187 sep-18 3.75% 67 +2.5 +7.0 +7.0 NDH5529 jun-18 2.00% 59 +2.5 +6.5 +6.5 SEB571 jun-18 3.00% 59 +2.5 +6.5 +6.5 LFH511 jun-18 2.50% 63 +2.5 +6.5 +6.5 SCBC134 mar-18 4.00% 48 +2.5 +6.0 +6.0 Swedish mortgage vs government bonds 95 85 75 65 55 45 35 25 15 Stadshypotek Nordea Hypotek LF Hypotekx509 Swedbank Hypotek SCBC SEB 5 0 1 2 3 4 5 6 7 Years to Maturity * Computed spread is based on a zero-coupon based government curve 6 3 February 2014 www.danskeresearch.com
Spread (bp) Rate BP Historic slope and curvature of swap term structure 240 190 140 90 40-10 -60 10-2y 5-2y 5-2-10Y Swap spread vs government bonds bp 1 Week 1 Month YTD SGB1050 jul-16 3.00% -36 +0.4-1.7-3.3 SGB1052 mar-19 4.25% -46-0.9-3.7-4.5 SGB1057 nov-23 1.50% -38-0.7-3.6-3.5 Swap spread vs EUR swaps bp 1 Week 1 Month YTD SWAP2Y feb-16 1.21% 76 +2.0 +1.7 +3.2 SWAP5Y feb-19 1.98% 95 +2.7 +4.1 +5.6 SWAP10Y feb-24 2.62% 72 +1.6 +2.8 +2.8 Forward swap rates 6.00 5.00 Swap 1Y1Y Swap 2Y2Y Swap 5Y5Y 4.00 3.00 2.00 1.00 0.00 Forward swap spread vs euro 150 100 SW vs EU Swap 1Y1Y SW vs EU Swap 2Y2Y SW vs EU Swap 5Y5Y 50 0-50 -100 7 3 February 2014 www.danskeresearch.com
Inflation-linked bonds Swedish inflation-linked bonds Cpn Mat. Yield 1 Week 1 Mth YTD Z-Cpn BEI CPI Delta Mrg Rte Nom. BEI vs Nom Sprd vs DE SGB3105 3.50% dec-15-0.03% +0.5-12.1-12.1 0.82% 5.60-0.03% SGB1049 0.75% 32.0 SGB3107 0.50% jun-17 0.10% -1.5-10.5-10.0 1.09% 3.04 0.25% SGB1051 1.11% 44.6 SGB3102 4.00% dec-20 0.50% -3.0-16.5-16.0 1.38% 1.63 0.94% SGB1047 1.34% 62.8 SGB3108 0.25% jun-22 0.66% -4.5-14.5-14.0 1.45% 1.22 1.26% SGB1054 1.39% 60.0 SGB3104 3.50% dec-28 0.91% -4.5-16.5-16.0 1.66% 0.82 1.37% SGB1057 1.30% 81.8 Swedish CPI and forecast BEI* spreads in Sweden and Germany 0.06 CPI YoY 0.05 0.04 0.03 0.02 0.01 0.00-0.01-0.02 Danske Bank Markets CPI Forecast YoY 1.90% 1.70% 1.50% 1.30% 1.10% 0.90% Sweden Germany 0.70% Years to Maturity 0.50% 0 5 10 15 * Zero-coupon based generic BEIs Carry at 0.75% repo 1M 3M 6M SGB3105-1.0-43.0-22.4 SGB3107-0.2-20.7-8.1 SGB3102 0.4-9.0-0.5 SGB3108 0.5-6.2 0.7 SGB3104 0.5-3.6 1.5 * Based on Danske Bank Markets CPI forecast Forward BEI at 0.75% repo 1M 3M 6M SGB3105 0.76% 1.18% 0.96% SGB3107 1.13% 1.36% 1.28% SGB3102 1.36% 1.49% 1.45% SGB3108 1.41% 1.50% 1.48% SGB3104 1.32% 1.39% 1.38% * Based on Danske Bank Markets CPI forecast 8 3 February 2014 www.danskeresearch.com
Correlation Asset and position correlations Top 10 correlations vs 10Y yield Asset Correlation 5Y SEGOVT 0.96 DE 10Y 0.91 Norway 10Y 0.87 Slope 0.85 UK 10Y 0.82 Curvature 0.78 US 10Y 0.76 2Y SEGOVT 0.74 USDJPY 0.48 WTI Oil 0.47 * Weekly data, 24-week window Top 10 negative correlations vs 10Y yield Asset Correlation ITRX Sr Fin -0.30 EURSEK -0.28 VIX -0.27 ITRX Main -0.23 ITRX X-over -0.22 NOKSEK -0.21 Steel -0.19 USDSEK -0.13 GBPSEK -0.10 Gold -0.07 * Weekly data, 24-week window Correlation between the yield of 10Y generic Swedish government bond and other assets and indices 1.00 0.90 0.80 0.70 0.60 0.50 0.40 0.30 0.20 0.10 0.00-0.10-0.20-0.30-0.40-0.50-0.60-0.70-0.80-0.90-1.00-1.10 Slope Curvature DE 10Y US 10Y ITRX Main WTI Oil OMX30 Gold * Correlations are computed from weekly data and a 24-week rolling window of log returns 9 3 February 2014 www.danskeresearch.com
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