Sweden: Go short BEI in SGBi3112 (Jun 2026) vs DBRi APR 2026
|Swedish BEI spreads have shifted sharply lower across the curve. We believe that an important reason is likely an increased liquidity premium on index-linked bonds relative to nominal SGBs.
However, we note that on a relative basis, the relationship vs German BEIs has not corrected much and remains at historically very stretched levels, especially in the short end of the curve.
In terms of inflation outlook, we expect broad convergence between the SEK CPI y/y rate and the EUR HICP. From July, the y/y SEK CPI level could even fall below the level in EUR. This would make the sharp difference in BEI levels all the more striking.
Recommendation: Sell SGBi3112 (Jun 2026) vs SGB1059 (Nov 2026) against Buy DBRi Apr 2026 vs DBR Feb 2026 @+79bp. (P/L: 40bp/110 bp).
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