That’s the view of a senior bond banker at Handelsbanken Capital Markets in Stockholm, and runs counter to expectations that Sweden's central bank, Riksbank, will boost a quantitative easing program at next week’s meeting.
The central bank "could start scaling down the purchases of covered bonds now," Anders Holmlund, deputy head of bond origination and syndication at Handelsbanken Capital Markets, said in interview. "They are still buying 5 billion kronor a week."
The central bank has so far bought about 184 billion kronor (USD 21.4 billion) of covered bonds as part of a 500 billion-kronor program to help ease the effects of Covid-19 on the funding markets.
But many market participants argue the purchases are having a destabilizing effect that distorts bond prices, especially in a credit market that Holmlund says has largely recovered. The central bank “could stop buying corporate bonds now and it wouldn’t change the market picture,” Holmlund said.
The banker dismisses claims by the central bank that the country’s credit market is dysfunctional and doesn’t expect the Riksbank to ramp up its pledge to buy up 10 billion kronor of corporate bonds on Nov. 26. "The Swedish krona market has been well functioning since April-May even as there has been volatility in spreads," Holmlund said. The bond banker also says investors "are still very interested in buying credit, and there’s a lot of cash."
Already a subscriber? Log in.
Read the whole article
No credit card is needed, and you will not be automatically signed up for a paid subscription after the free trial.
- Access all locked articles
- Receive our daily newsletters
- Access our app
Get full access for you and your coworkers.Start a free company trial today
Your trial for AMWatch has now started
With your free trial you get:
Full access to all locked articles on AMWatch.
Daily newsletter and ongoing top-newsletters. You can unsubscribe and subscribe to our newsletters anytime.
When your trial period expires
You will not be transferred to a paid subscription.
You will continue to receive our newsletters after the trial period expires. You can unsubscribe at the bottom of each newsletter.