Fewer Swedish domestic investors are overweight covered bonds than in February, according to an investor survey conducted by SEB, although covered bonds are perceived as the most attractive of four fixed income asset classes in the Swedish market.

The proportion of investors reporting to be overweight in covered bonds decreased from 84% in February, when the last survey was conducted, to 60% based on the latest survey, which was carried out between last Wednesday (28 March) and last Monday (2 April).

SEB analysts Charlotte Asgermyr and Sanna Eckardt said this is a “significant” decrease.

The share of investors underweight covered bonds increased from 4% in February to 12%, with 28% claiming to be neutral, up from 12% in February.

Asgermyr and Eckardt also asked investors whether they expected to increase or decrease their exposure, with the majority (68%) saying they intend to maintain their positions, 24% expecting to increase exposure, and 8% expecting to reduce exposure.

Investors identified supply/lending growth followed by funding costs as the most positive factor for covered bond asset swap spreads over the coming three months, while positioning/foreign investor interest followed by Swedish house prices and banks’ CDS development were seen as the most negative.

The spread development of the euro-Swedish krone basis swap was another factor investors could choose, with this on average seen as largely neutral, according to SEB’s analysts.

The analysts also asked survey participants to rank four fixed income asset classes in the Swedish market on a four grade scale from most attractive to least attractive, with the results showing that covered bonds are perceived as the most attractive fixed income asset class (the other three choices being nominal government bonds, inflation-linked bonds, and credit bonds).

Share of respondents claiming to be overweight and underweight in covered bonds in SEB surveys (% pts)

Source: SEB