Which is the safest bond market in the world?

Sweden map1At a time when many investors are accepting lower yields and buying sovereign bonds in safe havens, ING Investment Management declares that Sweden's bond market is the safest in the world.

Over 10 years Sweden ranked first in the world when looking at risk factors such as solvency risk and external dependency.

The safest nations in order are Sweden, Denmark, Finland, Germany, New Zealand, Australia, the UK, Netherlands, Canada and Austria. ING IM carried out the rankings using its own methodology.

Thede Ruest, fund manager at ING IM, says that the Nordics – Sweden, Denmark and Finland - have consistently taken the top three spots in terms of safety in the last decade.

However, there are risks including high household leverage that poses a key risk to the financial sector and ultimately to public finances, says Ruest.

The low-growth environment means it is “difficult to see Swedish 10-year rates rise to anything meaningfully above 2.25% in the near to medium term”, says Ruest.

Last year, France, Germany, the Netherlands and Switzerland were among countries that sold debt with negative yields.

In June investors accepted yields of -0.08% on two-year bonds worth 1.55 billion Danish krone (€208 million).

Trends such as this are broadly interpreted as a sign of investor nerves. They would prefer to take refuge from riskier assets, even at a real-terms loss.

ING IM’s holdings of Swedish bonds are above historical average and it has witnessed clients strategically shifting exposure away from perceived sovereign credit risks within the eurozone towards the Swedish and other Scandinavian government bond markets.

Data out last Friday from EPFR Global, a funds data provider, shows that fixed income investors investing in Europe have favoured regional fund groups with only Sweden standing out as a single destination.

©2013 funds europe