Investment Research — General Market Conditions
17 January 2018
Yield Outlook Risk to yields skewed on the upside but mainly on a 12M horizon Over the past month, we have seen renewed upward pressure on both European and US rates and yields. Ten-year German Bund yields have moved from 0.30% to 0.55% currently and 10Y Treasury yields have moved some 20bp higher.
Quick links
We now pencil in somewhat higher 10Y EUR and USD rates and yields (Germany) on a 12M horizon. We now expect the 10Y EUR swap rate to rise to 1.45% on a 12M horizon, from 1.20% previously. We forecast the 10Y USD swap rate will rise to 2.90%, from 2.70% previously. We forecast 10Y Bund yields (Germany) and 10Y US Treasury yields at 1.0% and 2.90%, respectively, on a 12M horizon.
US forecasts
Why are global rates and yields rising?
Norway forecasts
To get an idea of where the global fixed income market is heading in 2018, we look at the factors that have pushed yields and rates higher over the past month.
Forecasts table
First, in 2017, we saw a global recovery, which has actually gained momentum recently, with, in particular, the weak link China seeming to have picked up. This is visible in various growth indicators being at elevated levels globally. So far, inflation has been ‘the missing link’ but it seems that market expectations are picking up and traded inflation, like breakevens, is moving higher. When inflation expectations move higher, nominal rates and yields normally follow suit. Inflation expectations have moved higher
Eurozone forecasts
UK forecasts Denmark forecasts Sweden forecasts
Policy rate outlook Country
Spot
+3m
+6m
+12m
USD EUR GBP DKK
1.50 -0.40 0.50 -0.65
1.75 -0.40 0.50 -0.65
2.00 -0.40 0.50 -0.65
2.25 -0.40 0.50 -0.65
SEK NOK
-0.50 0.50
-0.50 0.50
-0.50 0.50
-0.50 0.75
Source: Danske Bank
10-year government bond yield outlook Country
Spot
+3m
+6m
+12m
USD GER GBP
2.55 0.56 1.30
2.55 0.60 1.35
2.70 0.70 1.50
2.90 1.00 1.80
DKK SEK
0.57 0.83
0.61 0.95
0.75 0.95
1.05 1.10
NOK
1.65
1.65
1.75
2.10
Note: EUR = Germany Source: Danske Bank
Source: Danske Bank
Second, we point to the continued rally in global equity markets, which has continued at the beginning of 2018, which has moved investors away from fixed income towards assets, such as equities.
Chief Analyst Arne Lohmann Rasmussen +45 45 12 85 32
[email protected] Assistant Analyst Morten Ehlers +45 45 12 82 87
[email protected]
Important disclosures and certifications are contained from page 13 of this report.
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Yield Outlook
Third, recently various ECB members have argued that the ECB QE programme should not be extended when the current programme runs out in September and in the recent ECB minutes there were comments that were interpreted as ‘hawkish’, which has made the market price in earlier rate hikes. The market is wondering whether we are about to see a European ‘tapering sell-off’. In 2013 when the Fed announced it would scale down its QE programme, there was a significant move higher in US and European yields and rates. Furthermore, the comments from the ECB come at the worst time given that the market in January normally has to absorb a wave of bond selling from the European debt offices. Fourthly, the market has added to pricing of rate hikes in the US recently and a new rate hike is almost priced for March this year. After the higher-than-expected CPI inflation print in December and hawkish comments from New York Fed President William C. Dudley last week, we also changed our call and now expect the Fed to hike at the March meeting and to hike a total of three times this year. Financial markets have priced in a March Fed hike by 85% probability and a total of two and a half hikes in 2018. For June, when we expect the second hike, markets have priced in a 50/50 probability. The Fed hikes have resulted in a flattening of the US curve 2Y10Y but recently there has been a discussion about changing the mandate for the Fed. Some FOMC members argue that the Fed should follow a price-level target. If the market buys into such a change, it should add to inflation expectations in the US, adding upside for longer-dated yields and rates. Finally, there is also a growing concern that US long yields need to move higher to attract foreign investors. The strong flattening of the US curve and the ‘expensive USD’ in the FX forward market mean that the return on US bonds when hedged in JPY or EUR is very low. The graph to the right shows the total return for a Japanese investor who buys a 10Y Treasury bond and hedges the currency risk with a 3M USD/JPY FX forward on a rolling basis. Even though the return is just 0.60%, it is still higher than the 10Y JGB yield, as the Bank of Japan (BoJ) conducts ‘yield control’ that keeps 10Y JGB yields close to zero. However, there are unconfirmed reports that the BoJ will abandon the ‘zero yield target’. If this happens, US yields need to move higher to attract buyers if Japanese yields move higher as a consequence.
German and US government bond yield in JPY (3M rolling FX hedge)
Several reasons why European and US yields have moved higher over the past month Source: Bloomberg, Danske Bank, Macrobond Financial
Source: Danske Bank
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Yield Outlook
What to expect from here? We have so far forecasted only modestly higher 10Y USD and EUR rates in 2018. However, the risk is now growing of a more pronounced move higher in especially 5Y and 10Y rates and yields when we look 12 months ahead. We underline that we still expect 10Y rates and yields to range-trade in Q1 and Q2, especially as the ECB seems priced too early relative to the so-called ‘sequencing,’wtich implies that after the QE purchases have ended in September we should expect at least six months before rate hikes will come into play. In addition, we do not see a sustained move higher in eurozone core inflation before late 2019. One of the factors we look at is real rate expectations. Real rates have moved slightly higher in the US but are still only around 0.3% in the 10Y segment. The real rates are even lower in EUR where 10Y real rates are around -0.6%. We see a growing risk that, as the recovery unfolds, real rates, especially in EUR, will start to edge higher primarily and drag nominal rates and yields higher. We also look at the so-called risk-premium. It shows the extra premium an investor demands to hold a 10Y bond instead of 10 1Y bonds over the next 10 years. In addition, here we see a risk of a repricing but again this is very much a story for the 9 to 12M horizon. Low real rates in EUR relative to USD
Risk of term-premium moving higher
3 2.5
2
10Y real rate
10Y real rate US
1.5 1 0.5
0 -0.5 -1
02-Jan-08 02-Jun-08 02-Nov-08 02-Apr-09 02-Sep-09 02-Feb-10 02-Jul-10 02-Dec-10 02-May-11 02-Oct-11 02-Mar-12 02-Aug-12 02-Jan-13 02-Jun-13 02-Nov-13 02-Apr-14 02-Sep-14 02-Feb-15 02-Jul-15 02-Dec-15 02-May-16 02-Oct-16 02-Mar-17 02-Aug-17 02-Jan-18
-1.5
Source: Danske Bank
Source: Macrobond Financial, Bloomberg
Overall, we now pencil in somewhat higher 10Y EUR and USD rates and yields (Germany) on a 12M horizon. We now expect the 10Y EUR swap rate to rise to 1.45% from earlier 1.20% on a 12M horizon. We forecast the 10Y USD swap rate will rise to 2.90%, from 2.70% previously. We forecast 10Y Bund yields (Germany) and 10Y US Treasury yields at 1.0% and 2.90%, respectively, on a 12M horizon.
Market still priced too soft in US – flatter 2Y10Y curve in USD We have seen a continued rise in 3M USD Libor 3M rates in Q4 as the market has ‘prepared’ for the December rate hike and as USD liquidity has become more ‘expensive’, which tends to push Libor fixings higher. The market is also pricing in rate hikes in 2018 more aggressively. However, the effect on the long-end of the US curve has been smaller and the US curve has continued to flatten. We continue to expect a further flattening of the US curve 2Y10Y.
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Yield Outlook
Further curve-flattening expected in the US, %
Source: Danske Bank
The flattening of the US curve in 2017 is reminiscent of the 2004-06 experience when the Fed hiked 17 times and the curve still flattened by 250bp. This development was famously named the ‘bond yield conundrum’ by Federal Reserve Chairman Greenspan in his 16 February 2005 testimony, as he rejected a variety of possible explanations such as a savings glut in Asia, lower inflation expectations and a weaker growth outlook. In Strategy: Bond yield conundrum vol.2, 30 November 2017, we looked at the forces that flattened the US curve in this cycle.
Modest steepening of the 2Y10Y curve in Germany In Germany, we continue to expect a steeper yield curve for the 2Y10Y in 2018. We expect the ECB to maintain a relatively tight grip on the short end of the curve in 2018 especially, as the first rate hike is priced quite early. As time passes, a certain upward pressure on the short end should be expected but the 5Y and 10Y segment of the curve is still more exposed to higher US yields and the expected end to the ECB QE programme. We have a 12M 1.0% forecast for 10Y Germany. We forecast higher 10Y USD rates…
…that will put upward pressure on 10Y EUR rates
Source: Danske Bank
Source: Danske Bank
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Yield Outlook
Contents and contributors Eurozone .......................................................................................................................................................................................................................................................................4 Macro
Senior Analyst
Aila Mihr
Interest rates
Chief Analyst
Arne Lohmann Rasmussen +45 45 12 85 32
+45 45 12 85 35
[email protected] [email protected]
US .......................................................................................................................................................................................................................................................................................5 Macro & interest rates
Senior Analyst
Mikael Olai Milhøj
+45 45 12 76 07
Interest rates
Chief Analyst
Arne Lohmann Rasmussen +45 45 12 85 32
[email protected] [email protected]
UK .......................................................................................................................................................................................................................................................................................6 Macro & interest rates
Senior Analyst
Morten Helt
+45 45 12 85 18
[email protected]
Denmark ........................................................................................................................................................................................................................................................................7 Macro
Chief Economist
Las Olsen
+45 45 12 85 36
Interest rates
Chief Analyst
Arne Lohmann Rasmussen +45 45 12 85 32
[email protected] [email protected]
Sweden ...........................................................................................................................................................................................................................................................................8 Macro & interest rates
Chief Analyst
Michael Boström
+46 (0)8-568 805 87
[email protected]
Senior Analyst
Michael Grahn
+46 (0)8-568 807 00
[email protected]
Senior Analyst
Marcus Söderberg
+46 (0)8-568 805 64
[email protected]
Senior Analyst
Carl Milton
+46 (0)8-568 805 98
[email protected]
Norway ...........................................................................................................................................................................................................................................................................9 Macro & interest rates
Chief Analyst
Jostein Tvedt
+47 23 13 91 84
[email protected]
Forecasts table .................................................................................................................................................................................................................................................... 10
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Yield Outlook
Eurozone forecasts
Continued strong PMIs and economic confidence at the highest level in 17 years point to an ongoing expansion in the euro area and we forecast growth of 2.0% in 2018 and 1.8% in 2019. However, despite the strong economic momentum, inflation pressures remain subdued, with December headline inflation dipping to 1.4% due to weaker energy price inflation, while core inflation remains below 1%.
Supported by the closing output gap, we expect core inflation to stay above 1.0% in 2018, but also not to accelerate much further from here without higher wage growth. In its latest forecast update the ECB again lowered its 2018 core inflation projection to 1.1%, which is now in line with our forecast. That said, the ECB’s Governing Council is becoming increasingly more split between members wanting to keep the link between forward guidance and inflation and members taking a more holistic view of the economy and inflation.
We continue to expect a modestly steeper EUR yield curve for the 2Y10Y in 2018. The ECB still maintains a tight grip on the short end of the curve. However, this is not the case for the 5Y and 10Y segment of the curve, which we expect to be pushed by higher US yields, the end of QE from the ECB and the pricing of a rate hike in 2019 and 2020. We have a 12M 1-0% forecast for 10Y Germany.
EUR forecasts summary
EUR swap curve – one-month change
17/01/2018 EUR
--- Forecast --Spot +3m +6m
Refi
0.00
0.00
0.00
0.00
-
-
-
Deposit
-0.40
-0.40
-0.40
-0.40
-
-
-
3M
-0.33
-0.33
-0.33
-0.33
-1
-2
-12
+12m
--- Fcst vs Fwd in bp --+3m +6m +12m
2.0 %
bp 20
1.5
Money market
15
1.0
10
0.5
Government bonds 2-year
-0.57
-0.65
-0.60
-0.40
-
-
-
5-year
-0.13
-0.10
0.10
0.40
-
-
-
10-year
0.56
0.60
0.70
1.00
-
-
-
Swap rates 2-year
-0.13
-0.15
-0.10
0.10
-9
-12
-10
5-year
0.37
0.40
0.60
0.90
-4
+9
+24
10-year
0.95
1.00
1.15
1.45
-
+10
+28
5
0.0 -0.5
0
3
6
9 12 15 18 21 24 27
Change,bp (rhs)
18-Dec-17
Source: Danske Bank
Source: Danske Bank
3M Euribor
10Y EUR swap rates
Source: Macrobond Financial, Danske Bank
Source: Macrobond Financial, Danske Bank
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0
16-Jan-18
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Yield Outlook
US forecasts
After the higher-than-expected CPI inflation print in December and hawkish comments from NY Fed president Dudley, we have changed our call and now expect the Fed to hike at the March meeting and to hike a total of three times this year. March seems like a good time to hike, as growth is strong and markets are calm.
Markets have priced in a March Fed hike by 85% probability and a total of two and a half hikes in 2018. In June, where we expect the second hike could come, markets have priced in a 50/50 probability.
Markets more or less think the hiking cycle ends by the end of 2018 or early 2019, as there is only priced one additional hike in 2019. We disagree and think the hiking cycle has a little further to go and still see two further hikes in 2019. Hence we still see a case for a Fed repricing next year in 2019 pushing 2Y yields higher. We continue to expect a flattening of the curve for the 2Y10Y on a 12M horizon. The short end is pushed higher by Fed rate hikes, while the long end could be kept low by investors buying ‘high yielding’ US fixed income assets, low inflation expectations and a lower neutral rate.
USD forecasts summary
USD swap curve – one-month change
17/01/2018 USD
--- Forecast --Spot +3m +6m
Fed Funds
1.50
1.75
2.00
2.25
-
-
-
3M
1.73
2.00
2.10
2.35
+4
-5
+3
2-year
2.03
2.05
2.20
2.50
-
-
-
5-year
2.37
2.40
2.60
2.80
-
-
-
10-year
2.55
2.55
2.70
2.90
-
-
-
2-year
2.23
2.30
2.45
2.75
-3
+5
+26
5-year
2.43
2.50
2.70
2.90
+3
+19
+35
10-year
2.56
2.55
2.70
2.90
-4
+9
+26
+12m
--- Fcst vs Fwd in bp --+3m +6m +12m
3.0 %
bp 20
2.5
Money market
15
2.0 1.5
Government bonds
Swap rates
10
1.0
5
0.5
0.0
0 0
3
6
9 12 15 18 21 24 27
Change,bp (rhs)
18-Dec-17
Source: Danske Bank
Source: Danske Bank
3M USD Libor rates
10Y USD swap rates
Source: Macrobond Financial, Danske Bank
Source: Macrobond Financial, Danske Bank
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Yield Outlook
UK forecasts
Economic growth in the UK slowed in 2017 and the country is now among the slowest growing economies in the EU28. The reason is a combination of negative real wage growth, which has slowed private consumption growth (the main growth driver), and political uncertainty, which weighs on business investments. We forecast growth of 1.3% in 2018 and 1.2% in 2019.
Headline inflation was 3.1% in November pushed up by higher commodity prices and the weaker GBP. We expect inflation to ease slowly as we believe the effect of the weaker GBP will soon start to fade. In our view, the Bank of England is still too optimistic on wage growth and, hence, underlying wage growth and in a scenario with moderate GBP appreciation, we do not expect the BoE to not hike again before Q1 19.
The market is currently pricing in the next 25bp hike in November 2018, which is too early in our view – unless the GBP weakens considerably and, thereby, pushes inflation higher. However, given the high uncertainty surrounding Brexit and the relatively high volatility in the currency, we expect the market’s pricing of BoE to remain intact for now.
UK yields have risen substantially over the past month more or less in tandem with US and European yields. We have lifted our 1-12M forecast on 5-10Y yields 5-10bp and expect yields to trade around current levels in coming months. On a 6-12M horizon, we still expect the 2Y10Y yield curve to steepen moderately.
UK forecasts summary 17/01/2018 GBP
UK swap curve – one-month change
--- Forecast --Spot +3m +6m
+12m
--- Fcst vs Fwd in bp --+3m +6m +12m
Money market Repo
0.50
0.50
0.50
0.50
-
-
-
3M
0.52
0.52
0.53
0.64
-6
-16
-22
2-year
0.57
0.55
0.60
0.75
-9
-6
+2
5-year
0.83
0.85
0.95
1.20
-11
-7
+11
10-year
1.30
1.35
1.50
1.80
-4
+6
+27
2-year
0.84
0.85
0.90
1.05
-7
-9
-6
5-year
1.13
1.15
1.25
1.50
-3
+3
+20
10-year
1.37
1.40
1.55
1.85
-
+12
+37
Government bonds
Swap rates
2.0 %
bp 16
14 12 10 8 6 4 2 0
1.5 1.0 0.5
0.0 0
3
6
9 12 15 18 21 24 27
Change,bp (rhs)
18-Dec-17
Source: Danske Bank
Source: Danske Bank
3M GBP Libor rates
10Y UK swap rates
Source: Macrobond Financial, Danske Bank
Source: Macrobond Financial, Danske Bank
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Yield Outlook
Denmark forecasts
We do not expect rate changes from the Danish central bank over the next 12 months. If anything, we could see the central bank intervening in the market to weaken the DKK, as fundamentals such as the significant current account surplus still tend to strengthen the DKK. The 3M Cibor-Euribor tightened in 2017. High liquidity in the money market is dragging Cita rates lower and Cibor fixings down. We expect DKK fixings to remain at the current level or fall to a slightly lower level for the time being. In 2017 we saw that DKK swap rates continued to tighten versus EUR swap rates – 10Y and 5Y5Y spreads in particular have tightened. We could see a continuation of this overall trend but we are probably approaching levels where we should not expect any significant tightening.
Danish government bonds have also tightened versus those of Germany in 2017. However, the Danish Debt Office has announced that the government will buy back the new government guaranteed bonds, which will fund social housing ahead. However, this does not mean supply will be higher as the government will draw on its booming cash reserves at the government account. Our base scenario expects the bond yield spread to Germany to remain at more or less the current level.
DKK forecasts summary
DKK swap curve – one-month change
17/01/2018 DKK
--- Forecast --Spot +3m +6m
CD
-0.65
+12m
--- Fcst vs Fwd in bp --+3m +6m +12m
Money market -0.65
-0.65
-0.65
-
-
-
2.0 % 1.5
Repo
0.05
0.05
0.05
0.05
-
-
-
3M
-0.31
-0.30
-0.30
-0.30
-1
-3
-14
6M
-0.15
-0.15
-0.15
-6
-9
-15
0.5
2-year
-0.37
-0.45
-0.40
-0.20
-
-
-
5-year
0.08
0.10
0.30
0.60
-
-
-
0.0
10-year
0.57
0.61
0.75
1.05 Swap rates
-
-
-
2-year
0.00
0.00
0.05
0.30
-6
-9
-3
5-year
0.51
0.55
0.75
1.10
-3
+10
+29
10-year
1.10
1.15
1.30
1.60
-1
+9
+27
-0.12 Government bonds
bp 16
1.0
-0.5
0
3
6
9 12 15 18 21 24 27
Change,bp (rhs)
18-Dec-17
Source: Danske Bank
Source: Danske Bank
3M Cibor rate
10Y DKK swap rates
Source: Macrobond Financial, Danske Bank
Source: Macrobond Financial, Danske Bank
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Yield Outlook
Sweden forecasts
The Riksbank decided at the December policy meeting to formally end bond purchases (QE) by the end of last year. In practice though, QE continues due to it also making the decision to start pre-reinvesting the redemption of SGB 2019 already in January this year. As a result, Riksbank-bond holdings will increase by another SEK45bn.
The repo-rate forecast was held intact with the first rate hike in Q3. December CPIF inflation at 1.9% y/y was a 10th lower than the Riksbank expected but that is not a very meaningful deviation. So, it seems likely that the Riksbank will stick to the plan at the February meeting and possibly in April. Market pricing is already somewhat ahead of the Riksbank but as we approach summer 2Y to 5Y rates may well price in some more resulting in a flattening of the rates.
Our call is intact, meaning that currently planned rate hikes will eventually be postponed. The basic reason is that we expect inflation to gradually underperform the Riksbank's forecast. This is important considering that the Riksbank has repeatedly made clear that sustained inflation at 2% must be based on domestic inflation and in particular services. If rate hikes are postponed, the 2Y to 5Y flattening is likely to stop and go in reverse as we near summer.
SEK forecasts summary
SEK swap curve – one-month change
17/01/2018 SEK
--- Forecast --Spot +3m +6m
Repo
-0.50
-0.50
-0.50
3M
-0.42
-0.45
-0.45
+12m
--- Fcst vs Fwd in bp --+3m +6m +12m
Money market -0.50
-
-
-
-0.45
-5
-15
-39
Government bonds 2-year
-0.35
-0.15
-0.25
-0.35
-
-
-
5-year
0.22
0.35
0.25
0.20
-
-
-
10-year
0.83
0.95
0.95
1.10
-
-
-
Swap rates 2-year
-0.11
0.10
0.00
-0.10
+11
-11
-47
5-year
0.57
0.70
0.60
0.55
+3
-17
-42
10-year
1.28
1.35
1.35
1.45
+0
-7
-11
2.5 % 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 0
bp 25
20 15 10
5 3
6
9 12 15 18 21 24 27
Change,bp (rhs)
18-Dec-17
Source: Danske Bank
Source: Danske Bank
3M Stibor rate
10Y SEK swap rates
Source: Macrobond Financial, Danske Bank
Source: Macrobond Financial, Danske Bank
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Yield Outlook
Norway forecasts
Norges Bank turned more hawkish in the 14 December Monetary Policy Report 4/17. Norges Bank moved the first hike in the sight deposit rate from mid-2019 to the end of 2018 or early 2019. A weak NOK is a key factor for the upward revision, while the uncertainty related to the effects of monetary policy implies it will follow ‘a cautious approach in the interest rate setting’. We expect the first hike in December 2018.
Recent data confirm the recovery case for the Norwegian economy. Q3 mainland GDP grew 0.6% q/q, i.e. in line with growth in the first half of the year. Growth is broad based. Consumer confidence is strong. The upward trend in Norwegian PMI still seems intact, despite substantial volatility in the index.
Mortgage market regulations, introduced early 2017, seem to be cooling the housing market. December numbers, however, indicate some stabilisation. We do not expect the recent slowdown in the housing market to have any significant effect on monetary policy, as so far it is in line with Norges Bank’s expectations. We expect 5Y and 10Y yields to be stable versus peers in 2018, as the Norwegian economy is improving slowly. However, on a 12M horizon, we could see a modest widening towards peers.
NOK forecasts summary 17/01/2018 NOK
Spot
NOK swap curve – one-month change
--- Prognose --+3m +6m +12m
--- Afvigelse fra forward i bp --+3m +6m +12m
Pengemarked Deposit
0.50
0.50
0.50
0.75
-
-
-
3M
0.85
0.80
0.80
1.10
-6
-12
+2
2-årig
0.65
0.65
0.80
1.00
-
-
-
5-årig
1.04
1.05
1.30
1.60
-
-
-
10-årig
1.65
1.65
1.75
2.10
-
-
-
Statsobligationer
Swaprenter 2-årig
1.17
1.15
1.30
1.50
-10
-3
-1
5-årig
1.60
1.55
1.80
2.10
-12
+7
+24
10-årig
2.01
2.10
2.20
2.55
+4
+10
+37
2.3 % 2.1 1.9 1.7 1.5 1.3 1.1 0.9 0.7 0
bp 14
12 10 8 6 4 2 0 -2 3
6
9 12 15 18 21 24 27
Change,bp (rhs)
18-Dec-17
Source: Danske Bank
Source: Danske Bank
3M Nibor rate
10Y NOK swap rates
Source: Macrobond Financial, Danske Bank
Source: Macrobond Financial, Danske Bank
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Yield Outlook
Forecasts
NOK
SEK
DKK
GBP
EUR *
USD
Forecasts Horizon
Policy rate
3m xIbor
2-yr swap
2-yr gov
5-yr gov
10-yr gov
Spot
1.50
1.73
2.23
5-yr swap 10-yr swap 2.43
2.56
2.03
2.37
2.55
+3m
1.75
2.00
2.30
2.50
2.55
2.05
2.40
2.55
+6m
2.00
2.10
2.45
2.70
2.70
2.20
2.60
2.70
+12m
2.25
2.35
2.75
2.90
2.90
2.50
2.80
2.90
Spot
-0.40
-0.33
-0.13
0.37
0.94
-0.57
-0.13
0.56
+3m
-0.40
-0.33
-0.15
0.40
1.00
-0.65
-0.10
0.60
+6m
-0.40
-0.33
-0.10
0.60
1.15
-0.60
0.10
0.70
+12m
-0.40
-0.33
0.10
0.90
1.45
-0.40
0.40
1.00
Spot
0.50
0.52
0.84
1.13
1.37
0.57
0.83
1.30
+3m
0.50
0.52
0.85
1.15
1.40
0.55
0.85
1.35
+6m +12m
0.50 0.50
0.53 0.64
0.90 1.05
1.25 1.50
1.55 1.85
0.60 0.75
0.95 1.20
1.50 1.80
Spot
-0.65
-0.31
0.00
0.51
1.10
-0.37
0.08
0.57
+3m
-0.65
-0.30
0.00
0.55
1.15
-0.45
0.10
0.61
+6m
-0.65
-0.30
0.05
0.75
1.30
-0.40
0.30
0.75
+12m
-0.65
-0.30
0.30
1.10
1.60
-0.20
0.60
1.05
Spot
-0.50
-0.42
-0.11
0.57
1.28
-0.35
0.22
0.83
+3m
-0.50
-0.45
0.10
0.70
1.35
-0.15
0.35
0.95
+6m
-0.50
-0.45
0.00
0.60
1.35
-0.25
0.25
0.95
+12m
-0.50
-0.45
-0.10
0.55
1.45
-0.35
0.20
1.10
Spot
0.50
0.85
1.17
1.60
2.01
0.65
1.04
1.65
+3m
0.50
0.80
1.15
1.55
2.10
0.65
1.05
1.65
+6m
0.50
0.80
1.30
1.80
2.20
0.80
1.30
1.75
+12m
0.75
1.10
1.50
2.10
2.55
1.00
1.60
2.10
* German government bonds are used, EUR swap rates are used Source: Danske Bank
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Disclosures This research report has been prepared by Danske Bank A/S (‘Danske Bank’). The author of this research report is Arne Lohmann Rasmussen, Chief Analyst. Analyst certification Each research analyst responsible for the content of this research report certifies that the views expressed in the research report accurately reflect the research analyst’s personal view about the financial instruments and issuers covered by the research report. Each responsible research analyst further certifies that no part of the compensation of the research analyst was, is or will be, directly or indirectly, related to the specific recommendations expressed in the research report. Regulation Danske Bank is authorised and subject to regulation by the Danish Financial Supervisory Authority and is subject to the rules and regulation of the relevant regulators in all other jurisdictions where it conducts business. Danske Bank is subject to limited regulation by the Financial Conduct Authority and the Prudential Regulation Authority (UK). Details on the extent of the regulation by the Financial Conduct Authority and the Prudential Regulation Authority are available from Danske Bank on request. Danske Bank’s research reports are prepared in accordance with the recommendations of the Danish Securities Dealers Association. Conflicts of interest Danske Bank has established procedures to prevent conflicts of interest and to ensure the provision of high-quality research based on research objectivity and independence. These procedures are documented in Danske Bank’s research policies. Employees within Danske Bank’s Research Departments have been instructed that any request that might impair the objectivity and independence of research shall be referred to Research Management and the Compliance Department. Danske Bank’s Research Departments are organised independently from, and do not report to, other business areas within Danske Bank. Research analysts are remunerated in part based on the overall profitability of Danske Bank, which includes investment banking revenues, but do not receive bonuses or other remuneration linked to specific corporate finance or debt capital transactions. Financial models and/or methodology used in this research report Calculations and presentations in this research report are based on standard econometric tools and methodology as well as publicly available statistics for each individual security, issuer and/or country. Documentation can be obtained from the authors on request. Risk warning Major risks connected with recommendations or opinions in this research report, including as sensitivity analysis of relevant assumptions, are stated throughout the text. Expected updates Monthly. Date of first publication See the front page of this research report for the date of first publication.
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Disclaimer related to distribution in the United States This research report was created by Danske Bank A/S and is distributed in the United States by Danske Markets Inc., a U.S. registered broker-dealer and subsidiary of Danske Bank A/A, pursuant to SEC Rule 15a-6 and related interpretations issued by the U.S. Securities and Exchange Commission. The research report is intended for distribution in the United States solely to ‘U.S. institutional investors’ as defined in SEC Rule 15a-6. Danske Markets Inc. accepts responsibility for this research report in connection with distribution in the United States solely to ‘U.S. institutional investors’. Danske Bank is not subject to U.S. rules with regard to the preparation of research reports and the independence of research analysts. In addition, the research analysts of Danske Bank who have prepared this research report are not registered or qualified as research analysts with the NYSE or FINRA but satisfy the applicable requirements of a non-U.S. jurisdiction. Any U.S. investor recipient of this research report who wishes to purchase or sell any Relevant Financial Instrument may do so only by contacting Danske Markets Inc. directly and should be aware that investing in non-U.S. financial instruments may entail certain risks. Financial instruments of non-U.S. issuers may not be registered with the U.S. Securities and Exchange Commission and may not be subject to the reporting and auditing standards of the U.S. Securities and Exchange Commission.
Report completed: 17 January 2018, 10:50 CET Report first disseminated: 17 January 2018, 11:55 CET
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