Sweden, as a small open economy, is trade and currency dependent. As such, local monetary policy is to a large extent dependent on certain foreign central banks. In the past, the trade-weight was measured by TCW. Today it’s called KIX. By using the weight in KIX, one can calculate the trade-weighted policy rate and get a good hint about the momentum in the rate cycle (rolling 6m change in the chart). As can be seen, there has been enormous hiking pressure, but it is now abating fast. As such, we are entering a phase where the policy delta is closer to zero and no longer a grim reaper for bonds, at least in the shorter maturity spectrum.
