Debt Office proposes extended maturity of Swedish government debt

30 September 2016 - Press release

The maturity of Sweden’s central government debt should be extended further and the Debt Office should be given increased scope to vary the pace of the reduction of foreign currency debt. These are the main changes in the Debt Office’s proposed guidelines for debt management.

The maturity of the central government debt should be extended further as the cost advantage of short-term borrowing has decreased. A longer maturity means smaller variations in the costs of government debt and lower risk.

The Debt Office proposes that the maturity of the nominal krona debt for instruments maturing within 12 years should be between 2.9 and 3.9 years (compared with the current 2.6 and 3.6 years).

The maturity of the debt will be extended by reducing the volume of interest rate swaps[1] that the Debt Office now uses to shorten the maturity, instead of adjusting bond borrowing.

The Debt Office also proposes that the limit for taking positions in the krona exchange rate is raised to SEK 20 billion from SEK 7.5 billion. Such an increase would allow the Debt Office to more actively manage risks associated with the reduction to be made in the share of foreign currency debt.

In the guidelines for lottery bonds, the Debt Office proposes a change that clarifies that lottery bonds should contribute to lowering the costs of central government debt in the long term. Such a change would allow the Debt Office to keep issuing lottery bonds even if that means higher costs in the short term when interest-rate levels are low. The Debt Office makes the assessment that borrowing in lottery bonds will reduce costs in the long term.

Central government debt management – proposed guidelines 2017–2020, pdf

Government decision on guidelines in November

The Debt Office shall propose guidelines for central government debt management to the Government no later than 1 October each year. The Government gives the Riksbank the opportunity to comment on the Debt Office's proposal before it adopts new guidelines no later than 15 November.

Contact

Robert Sennerdal, Press Secretary, +46 (0)8 613 47 01



[1] An ‘interest rate swap’ is a derivative contract which enables the Debt Office and another party to exchange fixed versus variable interest payments over a given period.