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The interest rate hike continues, but at a lower pace

The quarterly report ”Local Government Debt Management”, which offers a picture of the structure and conditions of the total debt of the municipal sector in Sweden, has now been updated with new data for the third quarter 2023.

The report is built on Kommuninvest’s lending and transactions registered by municipalities and regions, as well as their companies, in the debt management system KI Finans. The data set for the third quarter 2023 consists of 8540 loans, certificates and bonds with a total value of SEK 628 billion as well as 1 587 derivatives linked to underlying loans totaling SEK 193 billion.

New transactions in the third quarter 2023

The average interest rate for new transactions, including derivatives, increased from the second to the third quarter 2023 from 3.73 to 4.15 percent.

The average maturity of new transactions was shortened from 2.94 years for the second quarter 2023 to 2.13 years for the third quarter. At the same time, the average period of fixed interest, including derivatives, was shortened from 2.41 years to 1.83 years.

Total debt

The average interest rate for the total debt, including derivatives, increased from 2.18 percent in the second quarter to 2.31 percent in the third quarter 2023. The average interest rate excluding derivatives increased from 2.78 to 3.02 percent.

The average maturity decreased from 2.57 years for the second quarter to 2.43 years for the third quarter 2023. The average period of fixed interest, including derivatives, also decreased: from 2.66 years to 2.57 years. By using derivatives, the period of fixed interest was extended from 1.47 years to 2.57 years.

– Higher market interest rates continue to have an impact on the municipal sector’s borrowing costs. The increase in the average interest rate during the third quarter was certainly significantly lower than the previous quarter, but this is largely due to fewer transactions. We expect that the average interest rate will continue to rise in the coming quarters, says Erik Törnblom, acting Head of Research at Kommuninvest.

Local Government Debt Management Q3 2023

For further information

Erik Törnblom
Acting Head of Research
Tel: +46 70 279 17 21

Victoria Preger
Head of Communications
Tel: +46 70-266 87 26