Weekly Asset Heatmap

Weekly Asset Heatmap: Sweden

Our signals suggest concerns over a slowing housing market could trigger big moves in the krona and Swedish 10-yr yields.

heatmap-sweden

Our Riksbank signals suggest big moves in the krona and Swedish 10-yr yields may occur in the next 30 days.

riksbank
Salient threads in the digital debate driving this movement include:
  • Production costs for apartment buildings have risen well over the Riksbank's inflation target of 6.2 percent per year. But there are now indications that housing supply is outpacing demand, even with the refugee influx.
  • Some market observers worry regulators may go too far in their zeal to cool the housing market. Recent data from Maklarstatistik showed that housing-price increases slowed after regulators introduced a pay-down requirement; data published by Valueguard on Friday showed that home prices dropped 1.5 percent in September, the steepest drop since October 2012.
  • The probability of a rate hike in July 2018 fell after recent CPI data showed lower-than-expected inflation. Still, a monthly survey showed CPI-inflation expectations stood at 2.08 percent for the five-year horizon, in line with the Sveriges Riksbank's target. (It is generally believed that the five-year expectations are most important to the bank).
  • According to one of our sources, September's CPI numbers suggest inflation might have peaked during this cycle and hence a flatter rate path and more Riksbank QE is likely to follow.
The Sveriges Riksbank next meets on October 26.

At the time of our writing,
  • EURSEK was trading at 9.5594, with a 1-month forward rate of 9.558.
  • NOKSEK was trading at 1.0262, with a 1-month forward rate of 1.025.
  • Swedish 10-yr yields are currently 0.83%, with a forward rate of 0.90%.

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