###POV: Upside risks to Swedish FRAs -.......>

SWEDEN: ###POV: Upside risks to Swedish FRAs

- Markets are still putting a close to 50/50 chance on a Dec hike but the

upcoming week sees a number of key data releases which could affect the outlook.

- Most notable is the release of Q3 GDP on Thursday, with 5/15 analysts in the

Bloomberg survey forecasting -0.2%Q/Q or less and 10/15 analysts forecasting

+0.2% or higher (with no forecasts in the -0.1% to +0.1% range.

- This week also sees speeches from Riksbank members Ohlsson (tomorrow), Jansson

(Thurs) and Skingsley (Fri).

- We think there are upside risks to FRAs here. A rate hike could be priced out

on poor data this week. However until we receive the CPI release on Dec 12 it is

unlikely a hike at the Dec 20 meeting will be priced in much more than now.

- Despite a fairly quiet week for data last week, Swedish FRAs rallied towards

the end of last week as oil sold off. The FRA curve has flattened over the next

year with the H9-Z9 spread narrowing from 23bp to 19bp since Nov 16. Longer

maturities have seen a fairly parallel shift in the curve over the past week,

with yields on 1+ year maturity FRAs around 4-5 basis points lower than Nov 16.