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Nordic Sovereign bonds, the last safe investment in Europe?

The yield of the Swedish 10 year notes fell to a new historical low. A move which indicates that Sweden is viewed by Investors as a new hedge…

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The yield of 10 year notes dropped to 2.06% around 6pm this Wednesday. It is the lowest yield ever registered according to Thomson Reuters Datastream, which tracks data starting from 1960.

Amid the uncertainties weighing on the euro zone, the Swedish sovereign debt acquired a status of “risk free” investment and stands out as an alternative to euro zone bonds. More globally, looking at 5 year CDS, Nordic countries appear by far as the world’s safest:

Nordic countries: the lowest 5y CDS (Credit Default Swaps) levels in the world

Sweden and Norway did not join the Euro in 1999. These two countries remained « sovereign » by keeping the control of their monetary policy. Thus, to contain the inflation generated by a strong growth since mid 1999, the Riksbank increased its key interest rate seven times (at 2% since the 6th of July, 2011) and the Norges Bank did the same four times (at 2.25% since the 12th of May, 2011)

Nordic economies have indeed accelerated their pace in 2010, led by Sweden, where the growth rate was at the record level of 5.5%. These countries now find themselves in a very enviable situation thanks to a growth driven by emerging markets, sound public finances and a rebound of interior demand.

Nordic Countries: very good forecasts for 2011

With € 36 billion assets under management (as of 06/31/2011), Nordea is positioned as a key player on the Nordic bonds markets. Nordea Investment Funds offers in its SICAV Nordea 1, four investment solutions, denominated in local currency or in Euro:
- Nordea 1 - Swedish Kroner Reserve (LU0064321663)
- Nordea 1 - Swedish Bond Fund (LU0064320186)
- Nordea 1 - Norwegian Kroner Reserve (LU0078812822)
- Nordea 1 - Norwegian Bond Fund (LU0087209911)

Next Finance , August 2011

Article also available in : English EN | français FR

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