The yield premium Swedish 10-year government bonds pay over benchmark German bunds widened to a six-month high amid signs the largest Nordic economy is deteriorating faster than estimated.
The spread, or difference in yield, between Sweden’s 10-year note and German debt with the same maturity grew to 13 basis points today, the widest since June 11, according to data available on Bloomberg.
Swedish annual services production fell by the most in three years in October, Statistics Sweden said today, adding to evidence the economy is stalling. Slowing growth has prompted the nation’s debt office to raise its borrowing forecasts for next year, most recently by 17 percent in October.
“Today’s data prints suggest that the global downturn now also is setting its mark on the domestic sector in Sweden,” said Tina Mortensen, an analyst at Citigroup Inc. in London, in a client note. This “supports our call for a December rate cut, and additional monetary easing heading into 2013,” she said.
The $500 billion economy will contract in the last three months of the year, Mortensen forecast. That “stands in sharp contrasts to the Riksbank’s forecast of a 0.2 percent quarter-on-quarter gain,” she said.
Swedish growth will slow to 0.8 percent this year from 3.9 percent in 2011 after weakening to an annual 0.7 percent in the third quarter led by falling exports, the Swedish Public Employment Services predicted today. Unemployment will rise to 8.4 percent in 2013 from 7.8 percent this year, it said.