Kommuninvest, the Swedish local government funding agency, has published an updated funding forecast for the 2017 calendar year. Kommuninvest estimates that total long-term funding is reduced to SEK 75 billion (USD 9 billion), compared to the previous funding forecast of SEK 90-95 billion (USD 10-11 billion).
A new Asset Liability Management (ALM) strategy, introduced in 2017, explains the reduced funding volume.
To summarize, the new ALM strategy means:
- Improved matching between assets and liabilities
- Funding needs are to a higher extent determined by developments in lending
- Improved liquidity in the liquidity reserve, the size of which increasingly reflects funding maturities and external factors.
The reduced funding requirement for 2017 is an effect of all these factors.
Christian Ragnartz, Head of Debt Management at Kommuninvest, points out that Kommuninvest still expects high long-term growth.
– Municipal funding needs are fundamentally a result of the strong Swedish population growth and increased investment in housing, premises, energy supply and other infrastructure. During the first half of the year, Kommuninvest’s lending increased by SEK 20 billion, or seven percent.
The new ALM strategy aims at securing even more cost-effective funding for local government investments, where benefit to Kommuninvest’s members has the highest priority.
– We seek to optimize funding operations for the expected future growth, so that Kommuninvest has the best possible position for value creation for its members and customers. The implementation of the new ALM strategy is now largely completed and future funding needs will be determined by municipal borrowing needs.
– The underlying growth trend means that our Swedish benchmark programme will continue to grow. With similar credit strength as the Swedish sovereign, an increasing number of investors view Kommuninvest bonds as attractive complements, now that the supply of government bonds has declined. We are actively working on measures to further improve liquidity, and attractiveness, of the programme, says Christian Ragnartz.
For 2018, Kommuninvest estimates the total long-term funding need to amount to SEK 85-100 billion (USD 10-12 billion at SEK/USD=8.4345). Long-term funding will continue to have a focus on benchmark funding in SEK and USD, including green funding, as well as Uridashi funding in the Japanese market.
Kommuninvest is a municipal cooperation for efficient and sustainable financing of housing, infrastructure, schools, hospitals etc. Together, we get better loan terms than each one individually. Since its inception in 1986, the Kommuninvest collaboration has helped lower the local government sector’s borrowing costs by many billion kronor. Currently, 288 municipalities and county councils/regions are members of this voluntary cooperation. With total assets of about SEK 400 billion (USD ~50 billion), Kommuninvest is the largest lender to the local government sector and the sixth largest credit institution in Sweden. The head office is located in Örebro.
For further information
Christian Ragnartz, Head of Debt Management
tel: +46 706 073 834, e-mail: firstname.lastname@example.org
Tobias Landström, Deputy Head of Debt Management
tel: +46 10 470 88 83, email: email@example.com
Björn Bergstrand, Head of Media Relations
+46 708 869 476, e-mail: firstname.lastname@example.org