Covid-19 developments have created dramatic volatility in the financial market – which has among other things affected transparency in a negative way. At the same time, the demand for Kommuninvest’s benchmark bonds in SEK, so called Kommunobligationer, is very high. In order to secure fair market pricing in issuing operations, thereby supporting the functioning of the market in such an extreme situation, Kommuninvest has decided to, starting today, introduce a new issue procedure.
This means that Kommuninvest immediately ends the daily tap issues in its eight outstanding Kommunobligationer. Instead, the company starts a routine, on an “every-second-week-every-second-bond” basis where, when needed, issues are made in half of the Kommunobligationer in the first week and in the other half in the following week. By practicing the “every-second-week-every-second-bond” routine, the whole bond curve can in principle be issued every week, which will secure high flexibility and a sustained low-risk profile.
This will be done according to a plan that is adopted and communicated beforehand. As an initial measure, Kommuninvest will publish an issue calendar which will preliminarily be updated ahead of every quarter of the year. The first calendar will be published shortly. Next possible issue day is 18 March. On this occasion, the following Kommunobligationer could possibly be issued: K2109, K2302, K2410 och K2602.
The terms of the issue, including indicative volume and maturity, will on every occasion be communicated in advance. Long-term supply will, like before, be decided by the borrowing needs of local and regional governments as well as a conservative approach to risk. Also like before, only Kommuninvest dealers will be able to place bids at the issues. The results of all issues will be continuously published.
Allocation will follow a multi-price method where bidders who have offered the highest price, that is to say the lowest interest rate, are allotted at the rate they offered. The starting point for the allocation will normally be to accept the number of bids necessary to reach the volume that was initially announced.
– To introduce a new issue procedure is a move we, because volumes have grown, have been considering for some time. But this decision has also been influenced by the unique real world context. By means of a clear and straightforward issuing strategy, which is consistent with how the central government manages its borrowing through the Swedish National Debt Office, we now aim to facilitate price formation in a very challenging financial situation, says Christian Ragnartz, Head of Debt Management at Kommuninvest.
For further information
Christian Ragnartz
Head of Debt Management
tel: +46 706 07 38 34
e-mail: christian.ragnartz@kommuninvest.se
Tobias Landström
Deputy Head of Debt Management
tel: +46 705 86 78 51
e-mail: tobias.landstrom@kommuninvest.se
David Ljung
Head of Communications
tel: +46 73 068 45 45
e-mail: david.ljung@kommuninvest.se
