Press release -
Rapidly rising interest rates for the municipal sector
The digital report "Local Government Debt Management" has now been updated with new data for the second quarter 2022.
The report, which offers a picture of the structure and conditions of the total debt of the municipal sector in Sweden, is based on Kommuninvest's lending and transactions registered by municipalities, municipal companies and regions in the debt management tool KI Finans. For the second quarter, the data set consists of 6 571 loans, certificates and bonds with a total value of SEK 506 billion as well as 1 393 derivatives linked to underlying loans totaling SEK 166 billion.
New transactions in the second quarter 2022
The rapid rise in interest rates continued. The average interest rate, including derivatives, for new transactions increased from 0.65 percent in the first quarter 2022 to 1.18 percent in the second quarter 2022.
The average maturity of new transactions was from the first to the second quarter 2022 extended from 2.50 years to 2.69 years. At the same time, the average period of fixed interest, including derivatives, was shortened from 2.91 years to 1.84 years.
Total debt
A clear increase was noted also for the total debt. The average interest rate, including derivatives, rose from 0.88 percent in the first quarter 2022 to 1.02 percent in the second quarter 2022. The average interest rate excluding derivatives at the same time increased from 0.52 percent to 0.82 percent.
The average maturity of the total debt increased from the first to the second quarter 2022 from 2.76 to 2.82 years. The average period of fixed interest, including derivatives, decreased somewhat from 2.84 years to 2.83 years. By using derivatives, the period of fixed interest was extended from 1.69 years to 2.83 years.
– We are now at a fast pace moving into a new interest rate environment. From the second quarter 2021 to the second quarter 2022, the average interest rate, including derivatives, paid by the municipal sector on new transactions increased from 0.23 percent to 1.18 percent. Because maturities and periods of fixed interest are relatively short, this has started to have clear effects in the total loan portfolio of the municipal sector. For municipalities and regions that have not yet done so, now is a good time to review their debt management and ensure that there is a readiness also for further interest rate increases, says Erik Törnblom, acting Head of Research at Kommuninvest.
Local Government Debt Management Q2 2022
For further information
Erik Törnblom, acting Head of Research, tel: +46 10 470 87 41, e-mail: erik.tornblom@kommuninvest.se
David Ljung, Head of Communications, tel: +46 73 068 45 45, e-mail: david.ljung@kommuninvest.se
Topics
Kommuninvest is a municipal cooperation for efficient and sustainable financing of housing, infrastructure, schools, hospitals etc. Together we get better loan terms than each one individually. Since the start in 1986, the Kommuninvest collaboration has helped reduce the local government sector’s borrowing costs by many billion SEK. Currently, 294 municipalities and regions are members of this voluntary cooperation. With a balance sheet total of approx. SEK 525 billion (USD ~63 billion), Kommuninvest is the largest lender to the local government sector and one of the ten largest credit institutions in Sweden. The head office is located in Örebro.
