The digital report ”Local Government Debt Management”, which is updated on a quarterly basis, 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 fourth 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. Following the new update, the data set consist of 6 444 loans, certificates and bonds with a total value of SEK 510 billion as well as 1 495 derivatives linked to underlying loans totaling SEK 171 billion.
New transactions in the fourth quarter 2021
The average interest rate, including derivatives, for new transactions increased from 0.25 percent in the third quarter to 0.36 percent in the fourth quarter. This means that the upward move of the third quarter was further enhanced.
The average maturity of new transactions was from the third to the fourth quarter shortened from 3.03 years to 2.97 years. The average period of fixed interest including derivatives, on the other hand, was extended from 2.35 years in the third quarter to 2.79 years in the fourth quarter.
Total debt
The average interest rate, including derivatives, of the total debt decreased from the third to the fourth quarter from 0.90 percent to 0.85 percent. This is a new low in a time series that began in 2015. The average interest rate excluding derivatives also fell during this period, från 0.50 percent to 0.47 percent.
The average maturity of the total debt decreased from 2.86 years in the third quarter to 2.82 years in the fourth quarter. The average period of fixed interest, including derivatives, was also reduced: from 2.86 to 2.83 years. By using derivatives, the period of fixed interest was extended from 1.68 to 2.83 years.
– The rising interest rates in the market have had a clear impact on the new funding of the municipal sector. But this increase is starting from very low levels. The interest rate on new loans in the fourth quarter was in fact so low that the average interest rate of the total debt was reduced. For municipalities and regions, it is now important to prepare for the gradual rise in interest rates that is likely to be expected. Since both maturities and periods of fixed interest are short in municipal sector funding, an increase in market rates will relatively quickly have substantial effects, says Emelie Värja, Head of Research at Kommuninvest.
Local Government Debt Management Q4 2021
For further information
Emelie Värja
Head of Research
Tel: +46 73 078 06 35
E-mail: emelie.varja@kommuninvest.se
David Ljung
Head of Communications
Tel: +46 73 068 45 45
E-mail: david.ljung@kommuninvest.se
