Kommuninvest i Sverige AB, rated AAA/Aaa, issued its first USD benchmark transaction for the year on Wednesday. The Swedish local government debt office printed USD 1 billion in 3-year Reg-S/144a notes. The notes, which mature on 22 April 2021, pays a semi-annual coupon of 2.375% and was issued at a spread of 24.35bps over US Treasuries 2.00% due January 2021, equivalent to mid-swaps + 4bps.
The order book exceeded USD 2.1bn from 57 accounts, primarily central banks & official institutions as well as bank treasuries, and was one of the largest for Kommuninvest for several years.
Christian Rangnartz, Head of Debt Management at Kommuninvest, commented:
– It was a great outcome for Kommuninvest in the dollar benchmark market, with one of the lowest spreads we have had in recent years. We are pleased to see such broad-based investor interest for Swedish local government exposure. It is possible that the measures we are taking to increase liquidity in Kommuninvest’s bonds provided some additional support in this transaction.
Christian Ragnartz refers, among other things, to the decision of Nasdaq to include Kommuninvest’s Swedish benchmark bonds in its broadest bond index OMRXALL, effective from March 2018. Additionally, there are a number of initiatives under way to further improve liquidity in the bonds.
Kommuninvest continues to grow as a result of a larger market share and the increased welfare investments by Swedish municipalities and county councils. Of the SEK 600 bn in municipal sector external loan debt, half is today financed via Kommuninvest. Kommuninvest forecasts a total of SEK 85-100 billion in long-term funding in 2018, up from SEK 76 billion in 2017.
For further information, see separate Press Points.
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 its inception in 1986, the Kommuninvest collaboration has helped lower the local government sector’s borrowing costs by many billion kronor. Currently, 288 municipalities and county councils/regions are members of this voluntary cooperation, out of a total of 310 Swedish local governments. With total assets of around SEK 360 billion (USD ~41 billion), Kommuninvest is the largest lender to the local government sector and the sixth largest credit institution in Sweden. The head office is located in Örebro.