Foreign currency bonds

Part of the state’s borrowing requirement is funded in foreign currency bonds. The aim is to broaden the investor base and ensure alternate funding channels. Borrowing in foreign currency bonds helps lowering the long-term costs of central government debt.

Bonds in foreign currencies are primarily a supplement to bonds in Swedish kronor. The sales volume of foreign currency bonds depends mainly on the size of the net borrowing requirement.

The Debt Office issues small amounts in foreign currency even when the net borrowing requirement is small, in order to ensure a market presence and therefore a broad investor base.

The Debt Office also finances on-lending to the Riksbank through bonds and commercial paper in foreign currency.

Broad investor base leads to lower costs in the long term

Using foreign currency bonds spreads the underlying funding across more markets and broadens the investor base. This is an advantage especially when the borrowing requirement grows quickly. If the Debt Office's sole possibility in such a situation would be to increase funding in government bonds, the stress on that market would be greater, resulting in higher interest rates. The possibility to use foreign currency bonds thus creates conditions for lower long term costs of the debt as a whole.

Borrowing in foreign currency bonds also provides established funding channels that are valuable as preparedness for crisis periods when the Debt Office may have to borrow very large amounts.

The choice of currency depends on market conditions

The choice of currency depends on market conditions. Timing of an issue and the choice of price (yield) at the issue date can be crucial for a successful result. The aim for the Debt Office is to succeed in borrowing the planned volume and doing so as cheaply as possible in a long term perspective.

Earmarked loans to the Riksbank

The loans to the Riksbank have the same amount, maturity, currency and yield as the bonds the Debt Office issues to finance on-lending. On-lending is not inlcuded in central government net lending. The asset position of central government is not affected by on-lending since central government has a claim of the same size. The on-lending amounts to just over 200 billion Swedish kronor.