The digital report ”Local Government Debt Management”, which offers a picture of the structure and conditions of the funding of the total debt of the municipal sector in Sweden, has now been updated with new data for the first quarter 2022.
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 first quarter consists of 6 564 loans, certificates and bonds with a total value of SEK 508 billion and 1 470 derivatives linked to underlying loans totaling SEK 171 billion.
New transactions in the first quarter 2022
The average interest rate, including derivatives, for new transactions increased from 0.36 percent in the fourth quarter 2021 to 0.65 percent in the first quarter 2022. This was a clear enhancement of the upward move that took place in the autumn.
The average maturity of new transactions was shortened from 2.97 years in the fourth quarter 2021 to 2.50 years in the first quarter 2022. At the same time, the average period of fixed interest, including derivatives, was extended from 2.79 years to 2.91 years.
Total debt
The average interest rate, including derivatives, of the total debt increased from 0.85 percent in the fourth quarter 2021 to 0.88 percent in the first quarter 2022. This is the first increase ever recorded in a time series that began in 2015. The average interest rate excluding derivatives also increased during this period, from 0.47 percent to 0.52 percent.
The average maturity of the total debt decreased from the fourth quarter 2021 to the first quarter 2022 från 2.82 years to 2.76 years. The average period of fixed interest, including derivatives, increased on the other hand from 2.83 years to 2.84 years. By using derivatives, the period of fixed interest was extended from 1.66 years to 2.84 years.
– It is clear that rising market interest rates are having a mounting impact on the funding of the municipal sector. The fact that the average interest rate of the total debt increased for the first time in many years is probably a sign that we are moving into a new interest rate environment. Interest costs today make up a small share of the total costs in the municipal sector. But it is a cost item that will increase. In this situation, municipalities and regions need to ensure that they have a stable strategy in their debt management, says Emelie Värja, Head of Research at Kommuninvest.
Local Government Debt Management Q1 2022
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
