Press release -
The interest rate hike continues for the municipal sector
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 second 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 tool KI Finans. The data set for the second quarter 2023 consists of 8 482 loans, certificates and bonds with a total value of SEK 624 billion as well as 1 545 derivatives linked to underlying loans totaling SEK 190 billion.
New transactions in the second quarter 2023
The average interest rate for new transactions, including derivatives, increased from the first to the second quarter 2023 from 3.28 to 3.73 percent.
The average maturity of new transactions was shortened from 2.97 years for the first quarter 2023 to 2.94 years for the second quarter. At the same time, the average period of fixed interest, including derivatives, was shortened from 2.63 years to 2.41 years.
Total debt
The average interest rate for the total debt, including derivatives, increased from 1.89 percent in the first quarter to 2.18 percent in the second quarter 2023. The average interest rate excluding derivatives increased from 2.37 to 2.78 percent.
The average maturity decreased from 2.59 years for the first quarter to 2.57 years for the second quarter 2023. The average period of fixed interest, including derivatives, also decreased: from 2.71 years to 2.66 years. By using derivatives, the period of fixed interest was extended from 1.54 years to 2.66 years.
– The rise in interest rates, which has now been going on for around 1.5 years, is having increasing cost effects in the municipal economy. From Q4 2021 to Q2 2023, the average interest rate, including derivatives, for new transactions increased by well over 3 percentage points: from 0.36 to 3.73 percent. In the budget processes that many municipalities and regions will soon begin, this will be an important factor to take into account, says Erik Törnblom, acting Head of Research at Kommuninvest.
Local Government Debt Management Q2 2023
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 550 billion (USD ~51 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.
