As part of the set of charts related to the Swedish Residential Bubble the following charts outline 2, 5, 10 and 30 Year Swedish Government Bonds.
Major buys were created in February 2018 seeing price jump and in almost all cases the price is reaching a full retrace.
The most dramatic action has been seen in the 5 yr bonds which have fallen 147% since February 2018.
Selling in the 5 year bonds has increased over the last 2 weeks seeing a price drop of 215%. RSI levels have not quite hit the historical level for consolidation after a drop and the 50 ma and 200 ma have been broken on the daily and weekly charts.
There are a number of reasons for government bonds to be sold off however given the negative interest rates put in place by Swedish Riksbank since 2013 a decline in yields points to a possible move to increase the cost of borrowing and can be therefore seen as a contractional policy forcing interest rates to rise in borrowing industries such as banks. This would signal an end to low interest rates on mortgages which are currently being issued as low as 1.4-1.5% for flexible terms and 1.7% for 2 year fixed term.
The effects of increased borrowing rates may have considerable effects on the price of residential prices as consumers can not borrow at cheap rates. Expect pressure to be put on consumers to move onto fixed rates before interest rates rise in 4th quarter 2018 or early 2019.
Included below 2, 10 and 30 year Bonds.
2 Year Swedish Government Bonds
10 Year Swedish Government Bonds
30 Year Swedish Government Bonds
Major buys were created in February 2018 seeing price jump and in almost all cases the price is reaching a full retrace.
The most dramatic action has been seen in the 5 yr bonds which have fallen 147% since February 2018.
Selling in the 5 year bonds has increased over the last 2 weeks seeing a price drop of 215%. RSI levels have not quite hit the historical level for consolidation after a drop and the 50 ma and 200 ma have been broken on the daily and weekly charts.
There are a number of reasons for government bonds to be sold off however given the negative interest rates put in place by Swedish Riksbank since 2013 a decline in yields points to a possible move to increase the cost of borrowing and can be therefore seen as a contractional policy forcing interest rates to rise in borrowing industries such as banks. This would signal an end to low interest rates on mortgages which are currently being issued as low as 1.4-1.5% for flexible terms and 1.7% for 2 year fixed term.
The effects of increased borrowing rates may have considerable effects on the price of residential prices as consumers can not borrow at cheap rates. Expect pressure to be put on consumers to move onto fixed rates before interest rates rise in 4th quarter 2018 or early 2019.
Included below 2, 10 and 30 year Bonds.
2 Year Swedish Government Bonds
10 Year Swedish Government Bonds
30 Year Swedish Government Bonds