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High number of Nordic issues

The hot topic in November was still the Swedish housing market. The extent to which the stricter amortisation requirement approved by the Government at the end of the month will further impact house prices remains to be seen.

The credit market has thus been closed as a source of financing for most housing developers, and we have also seen a moderate downwards correction of bond prices in the sector, as well as some spread to other property bonds.

On the global front, Trump’s tax reforms have been under discussion, as have the North Korean missile tests, which the country reckons can reach the mainland US, but the latest test had limited effect on the financial markets. We have seen large outflows from high yield funds in Europe and the US, which has affected sentiment for high-yield credits in particular. However, we in the Nordics have mainly been immune to this because Nordic credits in the high-yield segment generally still have higher credit premiums, lower interest rate risk and lower market risk in the form of shorter time to maturity.

Activity in the Nordic credit market was high in November, especially in the primary segment, where we have seen a high number of issues from new and existing issuers.  Risk appetite has generally been good for the issuers, something that many have taken advantage of, even though now at the end of the primary cycle we have seen both higher margins and better terms. The secondary market has continued in line with last month, and price sensitivity has increased slightly due to large volumes from the primary market.

We were active in primary transactions in November with names including the Danish and Norwegian IT companies EG and Link Mobility. Carnegie Corporate Bond C fell back in November by 0.21 percent, bringing total fund return since the beginning of the year to 3.84 percent. We are maintaining the short duration to minimise the interest rate risk in the portfolio and are conservative in our view on credit duration, where we prefer shorter maturities but favour bonds we assess as having attractive margins.

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