SWEDEN: Increase In Retail and Services Expected Prices In February
The February Economic Tendency Indicator saw a large increase in the balance of retail sector firms looking to increase selling prices in the next 3 months, with services expected prices also moving higher. However, a solid pullback in consumer confidence dampens the hawkish message form the survey. On balance, this probably supports the Riksbank remaining on hold in March (in line with market pricing), but keeps the door open to another cut in Q2, particularly if hard domestic demand data and tariff uncertainty remains prevalent.
- Overall industry expected prices rose to 22 (vs 17 prior, highest since May 2023), driven by retail (36 vs 23 prior) and services (19 vs 15 prior). Within retail, grocery industry respondents saw the highest expected prices, which poses further upside risks to food inflation going forward (alongside the signals from PPI data).
- Consumer confidence fell to 95.0 (vs 98.3 prior, downwardly revised from 99.1 initial). This was driven by a sharp fall in respondents’ perception of the “the general economic situation in Sweden over the next 12 months” to -12 (vs +8 prior). Expectations for unemployment over the next 12 months also rose notably to 33 (vs 19 prior).
- Overall industry sentiment rose to 101.6 (vs 100.8 prior), with all sectors other than construction seeing increases.
- Taken together, the overall Economic Tendency Indicator eased a touch to 97.1 (vs 97.4 prior, upwardly revised from 97.4 initial).
- Final Q4 GDP is due tomorrow, alongside January retail sales data.
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BONDS: The German Bund edges to session high
- As previously mentioned, mostly a two way early price action in Govies, Bund is back at its very tight session high, there's been some buying interest in French OAT, and the shorter end Schatz and Bobl, but very limited impact in Rates (Euribor) since the moves are more risks driven (tariffs, Equities) as oppose to interest Rate.
- The early volume still stands out in the US, but stays fairly subdued in Europe.
GILT AUCTION PREVIEW: 1.125% Sep-35 linker
- The DMO will kick off issuance for the week this morning by launching the new 10-year 1.125% Sep-35 linker for GBP1.5bln.
- This will replace the 0.75% Nov-33 linker as the on-the-run 10-year issue.
- Auctions for that linker were strong with the lowest bid-to-cover in the five auctions so far this fiscal year at 2.89x (with a mean of 3.16x and 3.39x seen in the last auction in December).
- All of these auctions have been for GBP1.5bln nominal. We expect another strong linker auction. The 1.125% Sep-35 linker is due to be reopened on 25 February.
- Timing: Results will be available shortly after the bidding window closes at 10:00GMT with a further GBP375mln available to successful bidders via the PAOF.
EGBS: ING Point To Potential Delay Of Long-Term Pay-Side Swap Flow
ING note that “Dutch pension reforms are at risk due to a proposal in parliament that requires each fund to obtain a vote of approval from its participants before transitioning assets to the new system.”
- “This proposal could lead to a more gradual implementation of the reforms, delaying the unwinding of longer-dated fixed-rate receivers.”
- “Moreover, funds may become even more protective of their funding ratios until their transition date, potentially increasing the demand for fixed receivers in the near term”
