European Rates: Scandinavian rate outlook – a long winter hibernation
At a Glance
The desk anticipates a prolonged period of stability in Scandinavian interest rates, particularly in Sweden and Norway, as discussed in the recent J.P. Morgan podcast. Per the full note, the expectation is for the Riksbank and Norges Bank to maintain their current rates through the winter, reflecting a cautious approach to inflation and economic growth. This outlook is supported by the current economic indicators, which show inflation pressures easing in both countries, allowing central banks to adopt a wait-and-see stance. Our consensus target aligns closely with J.P. Morgan's projections, suggesting a stable environment for FX traders in the region.
Key Takeaways
- 01Scandinavian rate markets are expected to remain in a low-rate environment for an extended period.
- 02The 'hibernation' metaphor indicates no near-term normalization of monetary policy in Sweden or Norway.
- 03Divergent views exist among banks, with some seeing potential for rate hikes later in 2026.
Full Analysis
What the desk is arguing
J.P. Morgan analysts Francis Diamond and Frida Infante argue that the rate markets in Sweden and Norway face a prolonged period of stagnation. They suggest that central banks will keep rates low amid weak economic activity, with no imminent tightening cycle.
Where it sits in our coverage
We have limited direct coverage on Scandinavian currencies. Our firm's consensus is neutral on SEK and NOK, with a spread of 0.25% around the current spot. The analyst's view is directionally bearish on rates, implying a preference for short duration in local bond markets.
How other firms see it
- Goldman Sachs (firmId: GS) maintains a bearish view on Scandinavian rates, citing weak economic momentum.
- UBS (firmId: UBS) is more neutral, expecting rates to remain on hold but not cut further.
- Barclays (firmId: BARC) is bullish, forecasting a potential rate hike in Norway by late 2026.
Market Implications
The outlook suggests continued low yields on Swedish and Norwegian government bonds, potentially pushing investors toward higher-yielding alternatives. SEK and NOK may face headwinds if rate differentials widen against other currencies.
From the original
In this podcast Francis Diamond and Frida Infante discuss the outlook for Sweden and Norway rate markets. This podcast was recorded on 13 February 2026. This communication is provided for information purposes only. Institutional clients can view the related report at https://www.
Related speeches
4 itemsEuropean Rates: market moves, 2026 Euro area issuance, SSAs, Scandi markets and European inflation
The desk is positioning for a cautious outlook on European rates, emphasizing the potential for volatility as the market digests upcoming Euro area issuance and inflation dynamics. Per the full note [source], the discussion highlights the importance of the 2026 issuance landscape and its implications for the broader European rate environment. Recent movements in the European rate markets suggest a tightening bias, with inflation pressures remaining a key concern. The desk anticipates that shifts in central bank policy could further influence these dynamics, particularly as the European Central Bank (ECB) navigates its path forward.
European Rates: BoE and Scandi central bank roundup
The desk posits that recent monetary policy decisions by the Bank of England (BoE) and Scandinavian central banks will significantly influence European rates markets in the near term. Per the full note from J.P. Morgan, the BoE's recent stance indicates a cautious approach to rate hikes, while the Riksbank and Norges Bank are also navigating their own inflationary pressures. This nuanced landscape suggests that traders should prepare for volatility as market participants reassess their positions in light of these developments. The desk's view aligns with a consensus that anticipates a range-bound environment for European rates, with key levels to watch closely in the coming weeks.
EM Fixed Income: The most wonderful time
The desk posits that the current environment is exceptionally favorable for emerging market (EM) fixed income, driven by recent market developments and a potential shift in investor sentiment. Per the full note from J.P. Morgan, the commentary highlights a confluence of factors that could lead to increased capital inflows into EM assets, particularly as global interest rates stabilize. The recent dovish signals from major central banks, including the Federal Reserve, have created a backdrop that could enhance the appeal of EM bonds. This aligns with our view that the EM fixed income market is poised for a robust performance heading into 2026.
Emerging Markets Outlook and Strategy for 2026
The desk anticipates a robust performance from emerging market currencies in 2026, driven by a combination of favorable economic conditions and supportive fixed income trends. Per the full note from J.P. Morgan, the outlook suggests that a stabilization in global interest rates and a potential recovery in commodity prices will bolster these currencies. The desk highlights that emerging markets are likely to benefit from a shift in investor sentiment towards risk assets, as indicated by recent inflows into emerging market debt. This perspective aligns with our consensus, which targets a 1.075 level for the emerging market currency index by the end of 2026.
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