Despite maintaining their call for a Riksbank hike in September (followed by another in December), Danske Bank do not expect the message at Thursday’s Riksbank decision to be “hawkish enough to justify the current market pricing”
- They wrote on Friday that “with an accumulated 62bp priced over the coming year, we doubt that the Riksbank will be able to ‘out-hawk’ the current pricing and see risk/reward in favour of a dovish rates reaction.”
- As such, they recommend receiving the March 27 SEK FRA vs Euribor at -29bps, targeting a move to -40bps (stop loss of -20bps).
- “Deeming from the market reactions in May and June, the 2nd to 4th contracts saw the largest impact, both outright and spread-wise. As an outright position gives a larger exposure to the oil price/Middle East developments, we prefer to do it vs EUR. We highlight that this is a tactical trade over the Riksbank meeting and we will look to close it shortly afterwards.”