Norwegian credit default swaps trade well below even Switzerland and Germany, making Norway the “safest of safe havens for sovereign credit risk,” Hardy noted. and the Norges Bank’s revised forecasts aside, credit markets continue to price in more than a full percentage point of tightening in monetary policy over the next year.
Of course, there’s also oil — the lifeblood of Norway’s economy. Rising energy prices have taken oil to highs above $86 a barrel and crude remains near $84 on Nymex.
“One of our favorite trades within the G10 for the coming 6 to 12 months time frame is an AUD/NOK (Australian dollar/Norwegian krone) short, considering the extreme levels of that pair relative to its past history,” Hardy wrote in a research brief.
