Swedish markets function well, risk-taking reduced by war
Participants in the Riksbank's spring 2026 Financial Markets Survey largely assess the Swedish fixed-income and foreign exchange markets as functioning well. However, geopolitical concerns, particularly the war in the Middle East, have led to reduced risk-taking.
Geopolitical concerns curb risk appetite
Most participants in the Swedish foreign exchange and fixed-income markets assess the market as functioning well, according to the Riksbank's latest Financial Markets Survey.
However, a majority have reduced their risk-taking over the past six months, primarily due to geopolitical concerns, including the war in the Middle East and US trade policy.
While 18 percent of respondents still report high risk positioning, many have adjusted their nominal positions.
The foreign exchange market for Swedish kronor is predominantly viewed positively, with two-thirds of respondents considering it to be functioning well.
Liquidity in spot and forward markets, including foreign exchange swaps, remains favourable but has deteriorated slightly.
Some respondents note funding uncertainty and higher volatility at the front end of the FX swap market, with geopolitical tensions amplifying these effects on risk appetite and liquidity.
Foreign interest boosts fixed income
A clear majority of respondents consider the Swedish fixed-income market to be functioning well or very well.
Improved liquidity and a larger supply of nominal government bonds are positive factors, alongside increased interest from foreign investors following the Riksbank's bond sales.
Many view it as a well-functioning two-way market, allowing large interest rate swap volumes without widening spreads.
However, the proportion of respondents assessing the market as functioning well has slightly declined after an upward trend since 2022.
Geopolitical turmoil, especially the war in the Middle East, is consistently identified as impairing liquidity and fostering risk aversion.
For real government bonds, the Swedish National Debt Office's reduced issuance volume is the primary cause of declining secondary market liquidity, making this segment relatively limited in activity and interest.
Resilience with a caveat
The survey confirms the underlying strength of Swedish financial markets, yet the pervasive impact of geopolitical events introduces a significant caveat.
The observed reduction in risk-taking and specific liquidity concerns in FX swaps highlight how external shocks can quickly temper market confidence.
This necessitates ongoing vigilance from both market participants and the Riksbank to maintain stability amidst global uncertainties.