Halister News

(Bloomberg) -- While Riksbank’s First Deputy Governor Kerstin af Jochnick said Sweden’s central bank could “technically” buy covered, corporate or municipal bonds, such a move could face obstacles, Nordea analyst Martin Enlund says in emailed comments.

• Investors may be overreacting to these comments, as they did to comments from Floden on purchases of municipal bonds
  • EUR/SEK has reversed losses in the past hour; now up 0.3% to 9.5006
• Riksbank buying Kommuninvest bonds is something that has been discussed on and off for quite some time
• Riksbank can still implement more government QE to cover 1H 2017, so unclear if it needs to broaden buying yet
• The mention of corporate bonds is new; Riksbank hasn’t previously expressed care about levels at which corporates can fund themselves, so shifting policy now seems at odds with past thinking
  • Earlier QE has mainly been concerned with keeping the SEK at bay, and corporate QE is unlikely to help much with that due to the low volumes involved
• There’s very limited liquidity in corporate bonds with limited issue sizes, which could make it difficult to buy in any volume
• Such a program could be become politically sensitive; if operational details include only buying more liquid bonds, it could prompt questions why the government is subsidizing some companies in particular
• NOTE: Jochnick said would need to calculate the effects on the market; for example, buying corporate bonds would require resources to make credit assessments