Scandinavia offers select opportunities

The outlook for Scandinavian borrowers is bright, according to a panel of representatives from several industry sectors from the region speaking at the SEB workshop “Nordic investment opportunities: the issuers’ viewpoint” at the Euromoney International Bond Congress today (Tuesday).

  • 16 Feb 2001
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"The Nordic market offers substantial diversification opportunities for Euroland investors," said Klas Eklund, chief economist at SEB. Eklund sees value this year in short dated Swedish government bonds as the market has already priced in a 25bp Riksbank rate cut, although the actual cut may be 50bp. Investors looking for greater returns, he said, should turn to the corporate market.

Anders Osberg, managing director of Volvo Treasury, said investors that "pick and choose will strike gold" and find investment grade corporates offering attractive spreads.

Another panellist recommended long dated Swedish government index linked bonds. But although the sector has been promoted by the government, Kerstin Hessius, formerly at the Riksbank, predicted slow growth in the product.

One market that has developed over the last couple of years is the Danish mortgage backed sector. Peter Johansen of Realkredit Danmark said that the market was now more "internationalised" and followed major trends in the German and US markets.

"The introduction of ratings should lead to spread widening between issuers," said Johansen, "which means a more developed market. But the appeal for international investors will depend on the differential between Danish krone and euro spreads."

With regard to Nordic telecoms spreads, which have ballooned in recent months, Telia's Krister Kylas said: "There is a lot of event risk in the sector, but we hope that going forward there will be more extensive documentation and that investors will be able to differentiate between telecoms companies."

Volvo's Osberg agreed that investors need to examine the individual qualities of credits. "There are a number of reasons why a company's spreads might widen and investors must be careful," he said. "The huge funding needs of borrowers such as GMAC and DaimlerChrysler have created oversupply in the sector, but a general spread widening would be unfair to some credits."

Another feature of the Nordic market is the decline in Eurodollar issuance compared with a rise in euro fundraising over the last three years. However, panellists stressed that domestic activity would remain strong as it would not be viable for Nordic companies to borrow volumes that met international investors' need for liquidity.

  • 16 Feb 2001

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