Sweden - Buy 2Y-3Y covered bonds vs SGB
|It is likely the first round of covered QE in 2024 focused on stabilising spreads in 5Y segment (and amounts in 2025 too small).
With stable 5Y spreads, the Riksbank QE is likely to focus on other segments ahead. Outstanding amounts suggest that shorter segments 2022-23 are likely to be bought in the next rounds of QE.
As an alternative, we find the same arguments holding for Kommuninvest bonds where the bulk of volume is in 2022/23.
Riksbank holdings in SGB1054 and SGB1057 are above 60% and unlikely to increase, in our view.
Recommendation: buy SWH192 (Mar-23) vs SGB1054 (Jun-22) & SGB1057 (Nov-23) @66.75bp (P/L: 56bp/73bp)
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