The Riksbank’s Financial Markets Survey: Fixed income and foreign exchange markets functioning better

The Swedish Central Bank, Riksbank, has published the results of its second Financial Markets Survey 2023. The survey is conducted twice per year and addressed at all market participants active in the Swedish foreign exchange (FX) and fixed income markets. The purpose of the survey is to assess market activity and risks in the FX and fixed income market and the overall stability of the Swedish financial market.
The main findings of this fall survey are as follows:
– Survey participants have gained a less pessimistic view of the functioning and liquidity of the Swedish fixed income market. A majority now believes that the Swedish krona exchange market is functioning well. Additionally, fewer respondents think that the fixed-income market is functioning poorly, indicating an overall improvement in market perception.
– Most participants in the Swedish foreign exchange and fixed-income markets consider they are taking neutral or low risks. One quarter responded that they have reduced risk-taking over the last six months, with geopolitical uncertainty, inflation, and higher interest rates being cited as reasons for reducing risk-taking or keeping it at a low level.
– There have been improvements in market liquidity, particularly in the Swedish fixed-income market. Respondents noted improved liquidity, albeit uneven, in the market as the main reason for better functioning. Liquidity for covered bonds, interest rate swaps, and corporate debt market is also considered to have improved.
– Several respondents mentioned that the Riksbank’s sales of government bonds have improved liquidity and are expected to continue doing so in the future. The Riksbank’s previous asset purchases and their impact on liquidity were cited as the main reasons why the fixed income market was previously functioning poorly.
—
This report presents the results of the survey responded to in the period September 21 through October 9, 2023. The report including the findings can be found here.