巴黎银行-欧洲-投资策略-瑞典：量化宽松再投资政策将为2019年定下基调-20190417-8页_1mb

FOCUS | SWEDEN Summary

Core Content

This document provides an analysis of the Swedish krona (SEK) and the impact of the Riksbank's quantitative easing (QE) reinvestment policy on the currency's performance in 2019. It outlines the central bank's potential decisions and their implications for the SEK and EURSEK exchange rate.

Key Messages

• Riksbank's QE Reinvestment Policy: The Riksbank is expected to announce further details of its reinvestment policy at its 25 April monetary policy meeting, which will be a significant driver for the SEK in 2019.
• Portfolio Rebalancing Effect: The Riksbank's QE programme has had a strong portfolio rebalancing effect, with foreign investor holdings of Swedish government debt dropping from around SEK500bn in 2015 to just above SEK200bn in Q3 2018.
• Balance Sheet Expansion: Even though the QE programme ended in December 2017, the Riksbank continued to expand its balance sheet in 2018 by reinvesting bond proceeds. This expansion is expected to continue in 2019 if the reinvestment policy is announced.
• EURSEK Fair Value: The BNP Paribas CLEER™ model suggests that EURSEK is currently rich compared to its medium-term fair value, which is projected to decline to 9.56 by the end of 2019.
• Market Expectations: The Riksbank's rate hike projections for 2019 and beyond are considered steep by the market, which is not fully discounting them. However, macroeconomic data improvements may lead to a revision in the rate hike profile.
• FX Investor Positioning: Short positions in SEK FX suggest that the market is anticipating a potential shift in the Riksbank's policy, which may lead to continued portfolio rebalancing away from SEK assets.

Main Points

Riksbank's QE Programme

• Launched in January 2015.
• Formally ended in December 2017, but reinvestment of maturing bonds continued in 2018.
• The central bank's balance sheet expanded significantly, with a large share of the domestic bond market held by the Riksbank.
• The Bank of Japan holds a larger percentage of its domestic bond market than the Riksbank.

Portfolio Rebalancing

• Foreign investor holdings of Swedish government debt have more than halved since the start of the QE programme.
• This rebalancing effect is due to the large size of the Riksbank's balance sheet and Sweden's net deficit in its debt portfolio investment account.

Reinvestment Policy for 2019 and 2020

• The Riksbank is expected to announce the reinvestment plan for 2019 and 2020 at its 25 April meeting.
• The central bank's next bond redemption is SEK62.609bn in December 2020.
• If the reinvestment is spread across 2019 and 2020, the Riksbank's balance sheet will continue to expand, which may lead to continued portfolio rebalancing away from SEK assets.

EURSEK Exchange Rate

• EURSEK is currently above its medium-term fair value of 9.80.
• The CLEER™ model projects a decline to 9.56 by the end of 2019.
• The end of the Riksbank's balance sheet expansion may bring EURSEK back in line with its fair value.

Rate Hike Projections

• The Riksbank's latest projections suggest a 25bp rate hike in H2 2019 and two further 25bp hikes in 2020 and beyond.
• The market is not fully discounting these hikes, with a cumulative 15bp over a 1-year horizon and 34bp over a 2-year horizon.
• Macroeconomic data improvements may lead to a revision in the rate hike profile.

FX Investor Positioning

• Short positions in SEK FX indicate market expectations of a potential shift in the Riksbank's policy.
• A dovish reinvestment policy could lead to continued portfolio rebalancing away from SEK assets.

Key Information

• Riksbank's Next Bond Redemption: SEK62.609bn in December 2020.
• EURSEK Fair Value: Projected to decline to 9.56 by end-2019.
• Rate Hike Projections: 25bp in H2 2019, and two further 25bp hikes in 2020 and beyond.
• Portfolio Rebalancing Effect: Foreign investor holdings of Swedish government debt have dropped significantly since the start of the QE programme.
• FX Investor Positioning: Short positions in SEK FX suggest market expectations of a potential shift in the Riksbank's policy.

Conclusion

The Riksbank's QE reinvestment policy will be a key driver for the SEK in 2019. The central bank's balance sheet expansion has had a significant impact on the currency, and the end of this expansion may lead to a decline in EURSEK to its medium-term fair value. The rate hike projections for 2019 and beyond are considered steep by the market, but macroeconomic data improvements may lead to a revision in the rate hike profile. The document also outlines the risks associated with investing in the SEK and related financial instruments.