”Local Government Debt Management”, the digital report which is updated four times a year, offers a picture of the structure and conditions of the funding of the total debt of the municipal sector in Sweden. The report has now been updated with new data for the third quarter 2021.
The report is based on Kommuninvest’s lending and the data that municipalities, municipal companies and regions have registered in the debt management tool KI Finans. After the third quarter update, the data set includes 6 488 loans, certificates and bonds with a total value of SEK 503 billion as well as 1 587 derivatives linked to underlying loans totaling SEK 179 billion.
New transactions in the third quarter 2021
The average interest rate, including derivatives, for new transactions increased from the second to the third quarter from 0.23 to 0.25 percent. The previous downward trend was thereby turned into an upward move.
The average maturity of new transactions in the third quarter was 3.03 years. This was an increase from the 2.81 years registered for the second quarter. The average period of fixed interest, including derivatives, was also extended: from 2.18 years in the second quarter to 2.35 years in the third quarter.
The average interest rate, including derivatives, of the total debt decreased from the second to the third quarter by 3 basis points to 0.90 percent. This is the lowest observation so far in a time series started in 2015. The average interest rate excluding derivatives fell by 1 basis point to 0.50 percent.
The average maturity of the total debt increased from 2.82 years in the second quarter to 2.86 years in the third quarter. The average period of fixed interest, including derivatives, was at the samt time raised from 2.84 to 2.86 years. By using derivatives, the period of fixed interest was extended from 1.65 to 2.86 years.
– The municipal sector continues to borrow at low interest rates. There are signs in the market that interest rates may generally be on the rise. However, the increase in the average interest rate, including derivatives, for new transactions was not caused by a hike in short market rates, but rather by a combination of extended maturities and an increase in longer market rates. Maturities and periods of fixed interest have been extended. But this does not fundamentally change the fact that these time spans are relatively short and that rising market rates would fairly quickly have an impact on the municipal sector, says Emelie Värja, Head of Research at Kommuninvest.
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