National Debt Office foresees a stronger krona

We saw falling rates for Swedish government bonds after capital went looking for low-risk assets at month-end. The political mess in Italy was a factor that helped push up risk aversion. Alongside this, we noted something of a trend reversal for the Swedish krona, which appreciated considerably against the euro, although the movement tapered off towards the end of the month.

The Swedish National Debt Office decided to take a position in Swedish kronor that will be effected gradually to reach SEK 7 billion at most. Their assessment is that the krona is going to strengthen eventually after the conspicuous weakening we have seen, especially in 2018. The krona appreciated against the euro by almost SEK 0.30 during the month, closing May at 10.31, while USD closed at 8.81 against SEK.

We have been relatively active during the month, this time mainly with primary market transactions. We were, for example, involved in new issues from forestry company SCA, grocery company ICA and property company Humlegården. The last issued a green bond with a three-year maturity for which we believe we will be paid relatively well, as the coupon was set at Stibor +93. As we do not want to increase our exposure to real estate, the proceeds were matched against a maturity we have in the Norwegian property company Olav Thon.

In the finance sector, we were involved in a new four-year issue in the Nordic insurance company Sampo, which includes If Skadeförsäkring and Mandatum Life. Sampo is rated A- by S&P, with its Moody’s rating a notch lower at Baa1. The company paid Stibor +55 for the portion of the transaction made at a variable interest rate. To sum up, May was an unusually active month for new issues in Nordic Investment Grade and, on another positive note, there were also transactions outside the real estate sector.

Carnegie Likviditetsfond provides exposure to governments, municipalities, banking, housing and stable companies in the Nordic countries. The fund has low credit risk and maintains a very short interest duration.