The recent volatility roiling Europe’s high-yield markets has barely made a dent on Nordic junk bonds, which represent an important financing channel for the region’s many unrated borrowers and real estate industry.

But rather than superior credit profiles, Nordic high-yield bonds may be suffering from a lack of liquidity that means prices aren’t accurately reflecting the risks, according to Fredrik Tauson, who manages a fund with a credit opportunity mandate at Stockholm-based Nordic Cross.

“Either we will need to see a recovery in euro and U.S. dollar high yield or some repricing should take place in the Nordic region,” said Tauson, who would favor European over Nordic junk debt.

Any such repricing would hark back to the spring of 2020, when 35 fixed-income funds in Sweden gated amid a market panic brought about by the onset of the pandemic. Since then, regulators and the Swedish central bank have largely left it to the industry to fix the liquidity shortcomings.

Tauson also notes that a lack of investor cash flowing into or out of Swedish corporate bond funds this year means that the region’s biggest credit market “hasn’t seen its depth or liquidity tested yet.”

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