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Nordic Credit Weekly – 8th December 2017

The market is starting to slow down as we approach Christmas

US employment figures came in stronger than expected in November, where an additional of 228’ people were in labour.

Norges Bank regional network released their growth outlook. The network expects 2,4% in growth in Q1 and Q2 of 2018, slightly higher than the forecast from Norges Bank. Housing prices were down in November after the surprising growth in October. Prices were down 0,4%, not very dramatic.

Swedish and Norwegian interest rates moved in different directions last week. The SEK SWAP 5Y was down a couple basis points, closing on 0,33% while the NOK SWAP 5Y was up about 5 basis points, closing on 1,42%. The oil price (Brent 1m) was close to unchanged although quite volatile intra-week, finally closing on 63,4 USD/barrel.

Investment grade

The Nordic investment grade market showed little movement in credit spreads last week. We are starting to see signs of Christmas approaching as both the primary and secondary market are starting to slow down. NOK and SEK bonds have been fairly stable although a minor weakening of the sentiment. The slower market pace is also starting to show for us as we not were very active in the market last week. We bought the DNB covered bond maturing in 2022, financed by selling the 2021 maturity.

We expect market activity to slow down from now on and pick up again in January.

High yield

Fairly flat movement in the Nordic high yield market last week. Also the high yield part of the market is starting to see Christmas getting closer, but not at the slowest yet. Swedish real estate company Offentliga Hus issued 400m SEK on 3m Stibor + 7%. Lysaker Park issued a 4 year bond on 5,5%. Lysaker Park is an office building owned by insurance company Storebrand and has 9 years remaining on the contract. We took part in the Lysaker Park bond for several portfolios. We reduced our holdings in Lebara Group (Vieo) and sold out Cembrit entirely during the week. Lebara Group has experienced a slight negative sentiment recently and the Q4 figures from the company must show an improvement. Construction company Cembrit has shown poor figures due to their new production plant in Hungary not working as planned.

Digital gaming group Stillfront is contemplating doing a tap issue of an additional 390 MSEK and it will most likely be issued over the new year. Air cargo airline West Atlantic received a waiver for their covenant breach. The company will sell airplanes in order to handle the liquidity squeeze.

Jenny Andersson
Investment Specialist – Nordic Fixed Income

On the same subject:

The severe Corona weakness of the Norwegian krone (NOK) – What is going on?

We have seen the Norwegian krone (NOK) weaken substantially to other currencies in the Corona crisis despite being already at a historical level, including the euro (EUR) that we will discuss in this article.

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