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Danske Bank see downside risks to NOKSEK from a strategic and tactical perspective in 2025, and recommend buying an ATM 6M put option (spot ref 0.9820).

• “With implied volatility, risk reversals and butterflies at neutral to cheap levels we opt for a simple ATMS bought put option – although option structures that entail selling of optionality can be considered. The trade is profitable at maturity if NOK/SEK trades below 0.9580”
• Tactically, Danske expect NOKSEK to continue to be "strongly influenced by moves in relative rates and global risk appetite”, viewing the risks to Norges Bank’s easing cycle as skewed towards faster easing.
• They think long-term headwinds from “elevated unit labour cost growth, negative terms of trade shocks, underperforming asset markets, tightening of global monetary conditions and structural selling flows” will persist for both currencies in 2025, but remain stronger for NOK.
• Danske “regard speculative positioning in the cross to be long, which should also favour a move lower – potentially already in the coming months”.

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• A full reversal for Bund, albeit still in very contained ranges overall, surprisingly the Bobl outperforms somewhat, but the strip is still nonetheless closer to their earlier lows.
• Schatz is sold in 5.3k, Bund 5.2k cumulative volumes, no Block.
• Italian BTP is holding onto gains, helping keep the spread vs Bund 2.4bps tighter, and some of the pullback lower is met by buying interest, BTP is bought in 3k in three clips.