Kommuninvest / Interest rate rise levels off for the local government sector in Sweden

Kommuninvest's quarterly digital report "Local Government Debt Management" provides a picture of the structure and terms of the local government sector's total loan debt. The report is now updated with new data for the fourth quarter of 2023 and also includes a look ahead that shows moderate continued interest rate increases for the sector.

The report is based on Kommuninvest’ s lending and transactions registered by municipalities and regions, as well as their companies, in the debt management tool KI Finans. For the fourth quarter, the basis consists of 8,674 loans, commercial paper and bonds with a total value of SEK 647 billion and 1,632 derivatives with underlying loan amounts of SEK 200 billion.

• Although interest rates have now generally stabilized, our outlook ahead shows that we expect to see a rising average interest rate in the near future. This is due to the fact that the interest rate that municipalities, regions and their companies can receive when refinancing or borrowing new funds is still higher than the current average interest rate. Interest rates for municipalities averaged 2.22 percent in 2023 and we expect an average of around 2.49 percent in 2024, says Viktor Johansson, Analyst at Kommuninvest.

Reasons for the more moderate increase include the fact that long-term interest rates have already fallen and that the floating rate is expected to fall during the period.

Total loan debt and average tied-up capital

The average interest rate increased by 17 basis points for the fourth quarter of 2023 compared with the third quarter of 2023 to 2.48 percent, compared with 1.6 percent a year ago and just over 0.8 percent two years ago. The average tied-up capital in the Swedish local government sector is short, 2.5 years at the end of the fourth quarter of 2023. This means that investments are financed by borrowing that is renewed several times during the economic life of the investment. The capital tied up on new transactions in the fourth quarter of 2023 was 3.04 years and the fixed interest period, including derivatives, on new transactions in the fourth quarter of 2023 was 3.18 years.

Local Government Debt Management Q4 2023

For further information:

Viktor Johansson, Analyst, phone: +46 76-109 06 67
e-mail: viktor.johansson@kommuninvest.se

Victoria Preger, Chief Communication Officer, phone: +46 70 266 87 26
e-mail: victoria.preger@kommuninvest.se