Local Government Debt Management
The report Local Government Debt Management highlights how Sweden’s municipalities, regions and municipal companies structure their borrowing and manage financial risks. In addition to describing interest rate developments in the sector, the report focuses on analysing capital and interest rate maturity in order to illustrate sensitivity toward interest rate changes and financing risks. The statistics in the report are based on actual transactions registered in the debt management system KI Finans and cover roughly 75 per cent of the municipal sector’s total loan volume.
Q1 2026 in brief:
- The average interest rate including derivatives was 2.48 per cent, compared to 2.4 per cent in the previous quarter.
- The average capital maturity was 2.64 years and the average interest rate maturity (including derivatives) was 2.81 years.
- 25 per cent of the debt matures within 12 months and only 9 per cent has a remaining maturity of more than 5 years.
Interest rate level and distribution
Interest rate in the sector
The average interest rate in the municipal sector is affected by changes in market rates, lending margins and the choice of maturity structure. At the end of the first quarter, the average interest rate was 2.48 per cent, compared with 2.4 per cent in the previous quarter. Of the sector’s borrowing, 42 per cent is linked to a floating-rate base, primarily 3‑month Stibor.
For new transactions during the quarter, namely new or refinanced loans and derivatives, the average interest rate was 2.55 per cent.
Distribution of interest rates
A debt portfolio refers to all loans taken by a borrower, including any financial derivatives linked to the borrowing.
The average interest rate in the local government sector is distributed across a large number of borrowers, each with its own average interest rate. Depending on how a debt portfolio is structured - including the share of fixed vs. floating loans, capital and interest rate maturity profiles, and the timing of when loans and derivatives were entered into - interest rates vary.
Capital maturity
Capital maturity refers to the remaining term of a loan until its maturity date. A shorter capital maturity indicates that loans are refinanced more frequently and therefore carry higher risk.
Capital maturity over time
The average capital maturity is short, only 2.64 years at the end of Q1 2026. A capital maturity of 2.64 years means that an investment is financed with loans that are renewed several times during its economic lifetime. During the previous quarter the capital maturity was 2.47 years.
Structure of capital maturities
Apart from the length of the capital maturity, the risk profile of a debt portfolio is also influenced by its maturity structure. A debt portfolio with a balanced maturity structure contains loans of relatively similar size that mature at regular intervals. In an unbalanced maturity structure, a larger share of the debt matures at specific points in time or within a limited period. The municipal sector has an unbalanced maturity structure, with a significant proportion of loans maturing within the coming year.
- 25 per cent of the debt matures within 12 months, of which 18 per cent is made up by short term funding, such as commercial papers, which are extended three to four times per year.
- 9 per cent of the debt has a remaining maturity of more than five years.
Choice of capital maturity for the quarter’s transactions
The capital maturity of new transactions during the first quarter of 2026 averaged 3.19 years. The choice of maturity period can vary considerably from quarter to quarter, depending on which loans are maturing and which new ones are being issued.
- 28 per cent of the quarter’s new or refinanced loans were contracted with a maturity of one year or less.
- 30 per cent were contracted with maturities of five years or longer, of which 8 per centage points had maturities of six years or longer.
Interest rate maturity
Interest rate maturity refers to the period during which the interest rate on a loan is fixed. For a fixed‑rate loan, the interest rate maturity is the same as the capital maturity, whereas a floating‑rate loan has a short interest rate maturity and a longer capital maturity. The average interest rate maturity of a debt portfolio is a measure of the portfolio’s sensitivity to changes in the interest rate. A lower figure indicates that the interest rate is adjusted more frequently and therefore entails a higher level of risk.
Interest rate maturity over time
Many municipalities, regions and municipal companies finance their investments with loans that have short interest rate maturities. Some municipal actors then use interest rate swaps to extend the interest rate maturity. As a result, the overall interest rate maturity remains at approximately the same level as the capital maturity of the underlying financing.
- The average interest rate maturity including derivatives was 2.81 years, compared to 2.67 years in the previous quarter. Without taking the use of derivatives into account, the interest rate maturity was 1.75 years, which is due to the high proportion of floating‑rate loans that have very short interest rate maturities (three months or less).
Structure of interest rate maturities
Floating‑rate loans and the use of derivatives mean that interest rate maturity differs from capital maturity. The two key figures generally follow one another fairly closely, but with some difference. The floating‑rate loans contribute to a portion of the debt having a very short interest rate maturity, whilst interest rate derivatives are primarily used to extend the interest rate maturity.
- 32 per cent of loans and derivatives have interest rates resetting or maturing within 12 months.
- 15 per cent have interest rate maturity longer than five years.
Choice of interest rate maturity for the quarter’s transactions
The interest rate maturity, including derivatives, for new transactions during the first quarter of 2026 was 2.75 years. As with capital maturity, the choice of maturity period can vary considerably from quarter to quarter.
- 46 per cent of the quarter’s transactions were contracted with an interest rate maturity of one year or less. This includes newly contracted floating‑rate loans, but excludes floating‑rate loans that merely received a new interest rate.
- 28 per cent were contracted with an interest rate maturity of five years or longer, of which 12 per centage points had maturities of six years or longer.
Variation across municipal borrowers
Municipal borrowers design their debt portfolios independently, based on their chosen debt management strategy. These strategies vary both in the structure of the debt portfolio and in the degree of long‑term orientation. Some borrowers take on greater risk by maintaining a higher proportion of floating‑rate loans, whilst others reduce risk through predictable fixed‑rate loans. The borrowers’ debt management strategies result in differing lengths of capital and interest rate maturity, as illustrated in the scatter plot to the right. There are three primary strategies. Borrowers that use only fixed‑rate loans appear as the points forming a diagonal line in the figure, since such a strategy results in identical capital and interest rate maturities. Borrowers located below the diagonal use a combination of fixed‑rate loans and floating‑rate loans, which results in a longer capital maturity than interest rate maturity. Above the diagonal are borrowers who instead use floating‑rate loans in combination with long‑term derivatives, thereby achieving a longer interest rate maturity than capital maturity.
Variation of capital and interest rate maturity (xlsx) xlsx, 22.2 kB.
Underlying data
Local Government Debt Management is a report updated on a quarterly basis. The information in the report is based on Kommuninvest’s lending activities and on the transactions that municipalities, municipal companies and regions register in the debt management system KI Finans. The dataset for the first quarter of 2026 includes 9 825 loans, certificates and bonds, amounting to a total of SEK 746 billion, and 1 700 financial derivatives, corresponding to SEK 219 billion. The quarter’s transactions, consisting of both rollovers and newly contracted loans and derivatives, comprise 926 loans, bonds and certificates, totalling SEK 72 billion, and 81 financial derivatives, corresponding to SEK 11 billion.