That's warm...
This Sunday it was -24°C, -37°C with the wind chill... Monday was
about -20°ish (again with wind chill) i'd say... went up to -13° during the
heat of the day... My commuter car is a TDI diesel, even w/block heater
plugged in had a 15 second glow from the plugs, and I never got real cabin
heat (heat that wouldn't go to icy coldness when I came to a stop) for
nearly 20kms.... I'm sure the Volvo did well that day - but yes, it blows
whitish coloured exhaust past the rear window on cold days too.... The
exhaust seems to get pulled upwards into the draft coming off the car, this
draft spirals air at the back of flat-backed cars... my TDI Golf has the
same problem...
It's perfectly normal that in cold weather you can see your exhaust, but
at -9° you shouldn't see anything after the car warms up... and at +8° I
wouldn't expect anything at all to be visible.
BTW I live in Southern Ontario, and these temperatures were really cold for
this time of year, even in late January it isn't usually quite that cold.
Rear windows fog up in the cold for other reasons... you should have used
the rear defroster... Just from your body heat and inertia I suppose all the
heat must fly to the rear window and condensate on the outside of the
glass... The rear defroster is a switch to the right of the steering wheel
(near the sunroof switch) on a 960, and I believe the 850's and 760's were
the same location... you didn't mention the car.