Central government debt continued to decline in 2019

News 21 February 2020

Today, the Swedish National Debt Office is submitting its basis for evaluation of debt management in 2019 to the Government. The year was characterised by a continued decline in the debt, still lower interest rates, strained liquidity in the government bond market and an increased focus on sustainability.

The basis for evaluation report is submitted every year in February. It discusses, among other things, the cost of central government debt and describes how the Debt Office managed borrowing during the year within the guidelines adopted by the Government.

By 25 April, the Government then submits an evaluation of the debt management to the Riksdag. This document is to be submitted every two years.

The year in brief

• The central government budget showed a surplus for the fourth year in a row, and the central government debt as a share of GDP reached the lowest level since the mid-1970s.
• With a continued budget surplus, the borrowing requirement decreased and the Debt Office’s supply of government securities stayed at a historically low level. Borrowing in nominal government bonds remained the priority.
• The Debt Office’s low supply in combination with the Riksbank’s continued purchases of government bonds contributed to strained liquidity in the market. In the Debt Office’s annual survey, primary dealers gave liquidity a rating of unsatisfactory, while investors had a somewhat more positive assessment.
• The Government gave the Debt Office a mandate to issue a green bond by 2020. The bond is to be linked to environmental and climate expenditure items in the central government budget. During the year, the Debt Office worked together with the Government Offices to develop a framework for the green bond.
• The Debt Office continued to use the opportunity to take positions in the krona in order to reduce the cost of the central government debt. In 2019, the position that was built up beginning in 2018 was increased from SEK 3.9 billion to SEK 6.5 billion. The position showed a positive unrealised gain at the end of the year.
• Market participants’ confidence in the Debt Office’s strategies and actions fell in the 2019 survey, from the all-time-high of 2018. The drop was greatest among primary dealers and foreign investors, while the rating from Swedish investors was largely unchanged.
• The term to maturity and composition of the central government debt were in line with the Government’s guidelines during the year. The foreign currency exposure of the debt continued to decrease in accordance with the guidelines for 2019.
• The cost of the debt was SEK 14 billion, which corresponds to 0.3 per cent of GDP. That is a decrease from 2018 and slightly lower than the average over the last five years. Over time, the cost has declined as the debt has decreased and interest rates have gone down.

See the full report here:

Central Government Debt Management – Basis for Evaluation 2019 (only in Swedish)