SWEDEN: Borrowing Report Preview: SEK ASW Tighteners The Favoured Trade
Analysts expect SGBs to cheapen versus swaps going forward, catalysed by the NDO’s November borrowing plan. After narrowing towards (and briefly, through) zero during August and September, the 10-year SEK ASW has now moved back above 10bps. Despite the seemingly consensus nature of the trade, current market pricing doesn't point to much pre-positioning in 10-year ASW tighteners ahead of the borrowing plan's release. That could set the stage for a material move in the aftermath of the report should nominal SGB issuance come in above expectations.
- A reminder that nominal SGBs cheapened materially versus German peers and swaps during the summer, following the announcement of the Government’s expansionary fiscal plan. The SEK80bln of unfunded measures for 2026 (in addition to Ukraine aid) was larger than most analyst/independent forecaster estimates we had seen.
- Analyst views on SEK rates markets ahead of the borrowing plan's release:
- Danske Bank: "We believe the announcement of an increased nominal SGB supply increase next week should result in SGB ASW cheapening across the curve....we keep our short SGB1066 (May-35) ASW recommendation"
- Handelsbanken: “"As market attention shifts towards increased issuance following the NDO’s new borrowing forecast, we expect swap spreads to tighten again."..."Currently, the free float – i.e. bonds available to the market – is increasing rapidly, which could lead to greater pricing volatility”
- SEB: "We are structurally negative SGB 10 ASW and Dec could prove the local high in the ASW on the back of seasonals and a more cautious NDO next week."
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
FED: MNI Fed Preview - October 2025: QT, Or Not QT
MNI's preview of the October FOMC has been published - Download Full Report Here
- The Federal Reserve is overwhelmingly expected to cut the funds rate by 25bp for a 2nd consecutive meeting on October 29, bringing the target range to 3.75-4.00%.
- This will again be framed as a risk management cut, with the limited data available since the September meeting not disconfirming that the shift in the balance of risks had tilted toward labor market downside.
- Dissent to this decision should once again be limited to Gov Miran in favor of a 50bp cut.
- With limited new developments and official data to opine on, Chair Powell’s press conference will be eyed for affirmation that a December cut remains on track, as signalled by the most recent Dot Plot.
- He’s unlikely to give much away, but it would be surprise given the lack of data and relevant developments if he suggested that a further 2025 cut was in any greater doubt than it was 6 weeks earlier.
- Instead, we think focus in terms of action at this meeting will be on the balance sheet, with the Fed likely to announce an end to quantitative tightening amid diminishing reserve levels and nascent evidence of funding market pressures.
- We will also be watching for any news on the Fed’s communications framework, with an updated “Dot Plot” potentially unveiled at some point by year-end.
MNI’s separate preview of sell-side analyst summaries to follow on Monday Oct 27
RATINGS: Moody's Lowers France's Outlook To Negative, Maintains Aa3 Rating
Moody's has lowered its outlook on France to negative from stable.
- Moody's was expected to at least lower the outlook, so this is not a surprise - there had been some risks perceived of a downgrade to A1 (from Aa3) in the domestic and foreign currency long-term issuer and domestic-currency senior unsecured ratings.
- Per the Moody's release: "The decision to change the outlook to negative reflects the increased risk that the fragmentation of the country's political landscape will continue to impair the functioning of France's legislative institutions. This political instability risks hampering the government's ability to address key policy challenges such as an elevated fiscal deficit, rising debt burden, and durable increase in borrowing costs, thus leading to a more rapid weakening in France's key fiscal metrics than we currently expect."
- Both S&P and Fitch have already downgraded France’s sovereign rating to the single-A bucket this year.
USDCAD TECHS: Corrective Pullback
- RES 4: 1.4200 Round number resistance
- RES 3: 1.4167 50.0% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.4111 High Apr 10
- RES 1: 1.4080 High Oct 16 and the bull trigger
- PRICE: 1.4016 @ 16:33 BST Oct 24
- SUP 1: 1.3979/3907 20- and 50-day EMA values
- SUP 2: 1.3829 Bull channel base drawn from the Jul 23 low
- SUP 3: 1.3769 Low Sep 19
- SUP 4: 1.3727 Low Aug 29 and a bear trigger
USDCAD has pulled back from its recent highs. The trend condition is bullish and a move lower is considered corrective. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4111, the Apr 10 high, and further out, scope is seen for an extension towards 1.4167, a Fibonacci retracement. First key support lies at 1.3907, the 50-day EMA. Support at the 20-day EMA lies at 1.3979.
