The Norwegian interest rate market was relatively calm, but very short-term interest rates fell slightly. Credit spreads were stable in most segments.
At its interest rate meeting on 17 December, Norges Bank decided to keep its key interest rate unchanged at 4.00 %. The committee emphasised that inflation is still above target and that there is a need for a tightening monetary policy for some time to come. At the same time, the bank envisages a cautious normalisation going forward, with 1-2 cuts during 2026 if the economy develops as expected.
The Norwegian krone has weakened somewhat since the last report, which is helping to improve the price outlook. The committee does not want to slow the economy more than necessary, but does not want to risk inflation remaining above target for too long. The market is now pricing in a first interest rate cut in June 2026 as the most likely outcome.
As pointed out in previous monthly reports, we feel that the level of the credit spread for hybrid capital and subordinated loans is so tight that we have started to reduce some of these positions. We continued to do this in December and the proportion in these segments was reduced significantly during the month. We have acquired covered bonds, which offer lower current interest rates but are priced more attractively against their own historical average. This has also helped to raise the average credit quality of the portfolio.
Despite a major restructuring of the portfolio during the month, Forte Obligasjon maintains a balanced distribution between fixed and floating rate bonds, which contributes to good robustness against different interest rate developments. Exposure to different credit segments is now even broader, which reduces the risk of individual events and makes the fund well adapted to a market where future developments are still uncertain.
At the end of the month, the fund had a current interest rate of 5.26 %* and an effective interest rate of 5.11 %.*
*FExcess costs related to management. May change from day to day and is therefore no guarantee of the return in the period for which it is calculated.
Sincerely yours,
Stone Svalestad
