Default Swaps Show Swedish Debt Now Safer Than U.S. Treasuries

The perceived risk of Swedish debt fell below that of benchmark U.S. bonds as the largest Nordic economy is showing signs of accelerating.

Credit-default swaps on five-year Swedish government bonds have rallied this month, reaching 46.3 basis points today, compared with 46.5 for the world’s largest economy, according to data compiled by Bloomberg. That difference was as large as 32 basis points in January. Sweden’s 10-year notes yield 1.39 percent, which is nine basis points, or 0.09 percentage point, less than 10-year U.S. bonds.

A report today showed Sweden’s manufacturing unexpectedly expanded in July as the largest Nordic economy withstands a slump in demand from Europe. An index based on responses from about 200 purchasing managers rose to a seasonally adjusted 50.6 in July from 48.4 the previous month, Stockholm-based Swedbank AB (SWEDA) said today. A reading above 50 signals an expansion.

Sweden has been able to avoid a recession this year as companies such as retailer Hennes & Mauritz AB (HMB) and Sandvik AB (SAND) have benefitted from demand outside Europe and as the central bank cut interest rates. The economy expanded 1.4 percent in the second quarter as increased exports of services offset a decline in the export of goods. Consumer spending also rose.

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