Kommuninvest’s quarterly report ”Local Government Debt Management” offers a picture of the structure and conditions of the funding of the total debt of the municipal sector. Today, an updated data set for the second quarter 2021 is presented.
The report is built on Kommuninvest’s lending and the information that municipalities, municipal companies and regions have registered in the debt management tool KI Finans. The data set for the second quarter includes 6 616 loans, certificates and bonds with a total value of SEK 508 billion as well as 1 697 derivative linked to underlying loans totaling SEK 183 billion.
New transactions in the second quarter 2021
The average interest rate, including derivatives, for new transactions in the municipal sector was from the first to the second quarter 2021 reduced by 6 basis points to 0.23 percent. This means that the interest rate trend turned downwards again after a rise at the beginning of the year.
The average maturity of new transactions in the second quarter was 2.81 years. The figure for the first quarter was 2.52 years. The average period of fixed interest, including derivatives, was shortened from 2.68 years in the first quarter to 2.18 years in the second quarter.
The average interest rate, including derivatives, of the total debt of the municipal sector decreased from the first to the second quarter 2021 by 1 basis point to 0.93 percent. This is the lowest level registered so far in a time series started in 2017. The average interest rate excluding derivatives, on the contrary, increased by 1 basis point to 0.51 percent.
The average maturity of the total debt was reduced from 2.88 years in the first quarter to 2.82 years in the second quarter. The average period of fixed interest, including derivatives, for the total debt was at the samt time reduced from 2.94 to 2.84 years. The use of derivatives extended the period from 1.61 to 2.84 years.
– The interest rates paid by the municipal have reached very low levels. For the total debt, including derivatives, this is the lowest figure that we have seen in this reporting format. This in itself is beneficial. But it is also a situation that could change quite quickly. Given that maturities and periods of fixed interest continue to be short, and for the total debt even have been shortened, an interest rate increase in the market would have rapid effects in the loan portfolio of the municipal sector, says Emelie Värja, Head of Research at Kommuninvest.
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