How to Invest in Nordic Bonds


How to Invest in the Nordic Bonds

This site has long been recommending invest north!

Ancient boulders scoured from the glacier’s past are historical gray giants that watch the fresh forests of fir and pine. Fresh sea breezes warmed by a thin, summer sun caress ripe brown fields and clean the air.

Helsinki

Helsinki

One of the places Merri and I love is just outside Helsinki,  a museum that was formerly home for three famous architects. Here we enjoyed a wonderful fresh lunch overlooking White Lake where we learned more of Finland’s history.

We are looking at Nordic bonds not Scandinavian bonds because Finland is not part of Scandinavia (it is a Nordic country) and is related to Eastern Europe with its borders just a few miles from Estonia and St. Petersburg, Russia.  Finland is geographically the seventh largest country in Europe yet has only five million plus inhabitants.   Finland is also a new nation, a Sovereign Parliamentary Republic formed in 1917 after many years of occupation by Sweden and then Russia.

Helsinki-Vantaa Airport is one of the nicest airports in the world. All chrome and glass, high ceilings with lots of light and air, everything is neat, clean (as was everything we saw in Helsinki) and well organized. Helsinki is a boater’s paradise, sitting on the sea. One sees harbors everywhere lined with boats ranging from modern fiberglass powerboats and gin palaces to ancient wooden square riggers and two and three masted sloops and schooners. The city has a wonderful downtown area with excellent, old architecture, some nice city parks and every modern facility and accommodation.

The Hotel Kamp, is very deluxe and has a first class spa that sits atop the hotel.   You can see pictures at http://www.hotelkamp.fi/

One thing I love most about Helsinki is the fact that every imaginable facility is available, yet there are no crowds. The traffic is light and with just five million people in this huge nation you have a wonderful feeling of space.

Finland appeals to my outdoor spirit with 196,000 lakes and a coastline of 24,000 miles… and most of the nation filled with forests. They have a national concept there that the land belongs to everyone so these woods are free for roaming regardless of who owns the land.

The area around Helsinki reminds me of the lower altitudes of the Cascade Mountains or mid British Columbia, brash, bold, fresh, raw, a volcanic energy set amidst perfect peace and quiet. Of course we were there in late August and the winds were warm, skies perfectly blue and the sunshine bright. I do not doubt that in February, when the days run so short they are almost non existent and the snow piles up, that I might feel differently. I am told however that March is a wonderful time in Lapland up north, sunny and perfect for cross country skiing.

Finland was named the number one country (out of 142) in a survey carried out by the World Economic Forum measuring how well countries take care of their environment. Finland did especially well in three areas, keeping air and water clean, maintaining a high institutional capacity to deal with environmental problems and having a low level of greenhouse gas omissions.

Finland is also one of the very interesting northern places for investing and has a reputation for efficiency, competitiveness and efficient taxation that keeps the government financially strong.

Add this all together, the natural beauty, space, an efficient work force tackling leading edge technology financed by plenty of venture capitalists and you have a place that might really be a great to be. Throw in one of the finest luxury hotels and all those lakes plus the beauty of Lapland! Finland is worth a visit.

However one would not want to put everything in Finland nor look at long dated Finnish debt.

In 2010 the IMF warned  that though globalization had greatly benefited Finland over the last two decades, it also left it particularly exposed to the global crisis.

Given its extensive trade linkages and export characteristics, the economy has been hit hard, although there are signs of recovery.

Finland had a decade of fiscal surpluses that gave it a buffer to absorb this shock and create sizable stimulus measures without going deeply in debt. The banking sector weathered the crisis with healthy capital ratios and a prudent approach to banking.

Current global economic turbulence due to the euro crisis adds some uncertainty to the outlook for the financial sector and the overall economy.

Aging of Finland’s population is also a concern.

The IMF has urged Finland to reform its approach to the imminent aging of the population.  In 2010, the majority of voters in Finland were over 50 years and in a democracy it becomes difficult to carry out financial decisions disadvantageous to the majority.

Here is an excerpt from a message sent to our readers in 2006 included here because the recommendations remains valid:  One northern area this site has been promoting for years is Scandinavia.

Many recent computer models show that Scandinavia seems to be most resilient to the ecological and human impacts of climate change. Indeed in the mid-term, numerous cold places, like Britain, Canada and Scandinavia will likely benefit from climate change, with longer, warmer summers, safer climate and increasing crop yields. The same goes for parts of the northern American continent.

Take England as an example. A Friday July 28, 2006 Guardian article entitled “Climate change could bring tourists to UK” says: “Climate change could ‘dramatically’ change the face of British tourism in the next 20 years, with European tourists flocking to the UK to escape unbearably hot continental summers, experts say. Research shows that European tourists may choose to holiday in Britain as resorts nearer to home become too hot. Weather changes may provide revival opportunities for northern seaside towns such as Blackpool and put new strains on roads and development in southern coastal resorts, a study in the Journal of Sustainable Tourism said. You can read this entire message at The Guardian Unlimited.

Scandinavia may benefit as well. Copenhagen is Merri’s and my favorite European city. English is spoken. The people are friendly and happy. In fact according to one survey, they are the happiest people in the Western world. 

Recent messages at our sites have also shown that some of the strongest currencies in the world are all in the north…Norway, Sweden, Denmark and Canada.

Here we are nearly a decade later and northern climes look even safer.

In 2008 during the last global economic crisis, I moved 15% of my portfolio into Swedish and Danish bonds funds.  They offered lousy returns but great stability and safety.

An excerpts from an November 10, 2011 email Jyske Global Asset Managers sent me last week shows why Nordic bonds may again be one of the safest places to invest now.

An analysis from the American National Bureau of Economic Research points that Denmark, Sweden, Finland and Norway are the safest countries in Europe to lend to. The analysis shows that Denmark since its establishment as an independent state in year 980 has always met its debt obligations and has never let down its creditors. At the other end of the scale is Greece, which since 1829 has defaulted on 50.6% of the debt which the country has established.

There are numerous ways to invest in Nordic bonds.

Non American investors can invest in the JyskeInvest Danish Bond fund and JyskeInvest  Swedish Bond Fund.  See more at www.Jyske invest.com

Jyske Invest Swedish Bond Fund statistics as of November 2011:

swedish-portfolio

swedish-portfolio

swedish-portfolio

Jyske Invest Danish Bond Fund statistics as of November 2011:

danish-bonds

danish-bonds

danish-bonds 

Non US investors can get details on how to buy these funds from Rene Mathys at Jyske Bank Private Bank mathys@jbpb.dk

Jyske Global Investment Advisers (JGAM) can buy Nordic bonds for US advisory clients (accounts over $1,000,000).

As of November 14, 2011 JGAM is currently looking at increasing the bond exposure in its managed accounts but because government bond yields are low they may buy corporate issued bonds in US dollars  for a positive carry with increased US dollar loans.

JGAM just selected three new multi currency plays for its managed Forex accounts and advisory clients.

These ideas include adding (via currency sets) the  Singapore dollar.  JGAM’s research partner believes, that China will make a soft-landing. Food inflation has peaked and China has also managed to cool down the real estate market.With Europe, China´s biggest export market, heading into a recession the Chinese authorities may ease measures to spur growth and the Singapore dollar (SGD) will lead an Asian recovery.

See more about this Singapore position and the three multi currency portfolio sets.  Subscribers can access these ideas at their password protected site. Click here.

Learn how to get a Multi Currency password here.

Learn more about JGAM portfolios from Thomas Fischer at fischer@jgam.com

One way for US investors with smaller amounts to diversify is to invest in Nordic bonds is though NASDAQ OMX.

The OMX Nordic Exchange offers investors access to the key financial markets based in Northern Europe’s Scandinavian and Baltic nations. In 2007, this exchange was purchased by NASDAQ to make it easier for American investors to gain access to its securities.

Americans can invest in the Nordic Stock Exchange by opening a trading account with a financial institution or brokerage firm access to global markets.  Your broker will then forward your request to a licensed member of the OMX Nordic Exchange.

NASDAQ OMX has a large and well functioning Fixed Income market in Copenhagen which is among the largest in Europe measured both by turnover, volume and number of bonds.

copenhagen

A photo I shot on my last Copenhagen trip.

Large turnover – high transparency.

The bond market in Copenhagen is among the top five in Europe measured by turnover. In 2010 the total turnover was EUR 918 billion (market value, excl. repo), which corresponds to approximately EUR 76.5 billion in monthly turnover. This turnover was distributed over roughly 2,200 listed bonds that by the end of 2010 had a circulating amount on EUR 541 billion.

The Bond market in Copenhagen is characterized by being one of the most transparent in Europe. Thus, the bond members are, with only a few exceptions, required to report and publish all trades within a few minutes. The result is a market with a high level of price transparency to the benefit of both issuers and investors. Both price and trading data is published on NASDAQOMXNordic.com.

Mortgage Bonds, Government Bonds, Structured Bonds, Corporate and Other Bonds

At NASDAQ OMX – Copenhagen it is possible to list and invest in a wide variety of fixed income products.

Mortgage Bonds

The Danish Mortgage Bonds are unique due to the special way in which property/real estate investments are funded in Denmark. The strengths of these products are:

* The Danish law for issuance of Mortgage Bonds is stringent
* Issuance is very cost-efficient
* The distribution network is extensive
* A global “balance principal” applies
* The principle of low investor risk has been maintained since the 19th century
* So far no investors have lost their invested capital and no mortgage credit institution/mortgage credit bank has ever gone bankrupt.
* A clear majority of the Danish Mortgage Bonds have been rated by internationally recognized rating agencies.

With a circulating amount on EUR 437 billion and 1,877 bonds listed by the end of 2010, the mortgage bond segment accounts for the greater part of the Danish fixed income market. The total turnover of mortgage bonds in 2010, measured by market value (excl. repo), was EUR 779 billion.

Government Bonds

All Danish government bonds and notes can be traded at NASDAQ OMX Copenhagen. These bonds are characterized as being “low risk securities” that have attracted a significant interest from foreign investors.

The circulating amount of the Danish Government Bonds was EUR 88 billion by the end of 2010, distributed over 18 bonds. The value has been decreasing during the last couple of years due to lower need for government borrowing in Denmark. The total turnover in 2010 was EUR 131 billion (market value, excl. repo).

Structured Bonds

Throughout the last couple of years NASDAQ OMX Copenhagen has seen an increasing interest for both issuing and investing in structured bonds. We have therefore created a special market for the issuing and trading of these bonds. The investors can now choose between more than 170 different bonds with a total market value of approximately EUR 1 billion.

By creating a special market for Structured bonds NASDAQ OMX Copenhagen hopes to increase the transparency for these bonds. Based on the latest years development we furthermore expect this market to grow, with higher turnovers, increasing circulating amount and a higher degree of diversification among the bonds.

Corporate and Other Bonds

NASDAQ OMX Copenhagen has a special market for corporate bonds, convertible bonds, covered bonds (issued by banks) and other bonds. This market is called Corporate and Other Bonds. By having a separate market for these bonds we intend to increase focus on the many different bonds that can be traded at NASDAQ OMX Copenhagen. The number of listed bonds was 127 with a circulating amount of EUR 11 billion by the end of 2010. The total turnover in 2010 was EUR 7 billion (market value, excl. repo).

Read more about the Danish bond index here.

Fixed Interest bond index family on OMX Nordic Exchange Stockholm

OMRX – Fixed Interest bond index family – is a family of indexes. Its purpose is show the value trend of certain type of passively managed portfolio of Swedish interest bearing securities.

One of the OMTX’s tasks is to measure the performance of Swedish fixed interest portfolio fund managers.

Read More about Swedish bonds index here.

Gary

Learn more about multi currency portfolios here


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