Guidelines for central government debt management 2019

Today the Government adopted guidelines for the management of the central government debt. The maturity steering of the nominal and inflation-linked krona debt are merged. As a result, the maturity interval of the krona debt is changed to between 4 and 6.5 years. The steering of the composition of the debt is left unchanged.

When inflation-linked bonds were introduced in the 1990s, the strategy was to borrow in longer maturities than using nominal bonds, as investors were willing to pay a premium as insurance against inflation shocks. Now circumstances have changed and there are no longer any strong reasons for steering the maturities of the types of krona debt separately.

The Debt Office's quantitative and qualitative studies show that the relationship between maturity and cost is now the same for inflation-linked bonds as for nominal bonds, which means that there is no longer any reason to steer the maturity of the two types of debt separately. A common benchmark for the krona debt would also give a better overview of the level of risk in the aggregate krona debt and make it possible to reduce the steering interval. Maturity is one of several factors that affect the expected cost of and risk in the central government debt.

Summary of the guidelines for 2019

The maturity (in terms of duration) of the debt types is to be steered towards:

  • Foreign currency debt: 0–1 year
  • Krona debt: 4–6.5 years

The composition of the central government debt is to be steered towards:

  • Foreign currency debt: A reduction of up to SEK 30 billion per year
  • Inflation-linked krona debt: 20 per cent (in the long term)
  • The nominal krona debt is to make up the remaining share.

Background
The objective of central government debt policy is that the central government debt is to be managed in such a way as to minimise the long-term cost of the debt while taking account of the risk in its management. The debt is to be managed within the framework of monetary policy requirements.

Responsibility for attaining this objective is divided between the Government and the Debt Office. The Government steers the overall level of risk in its annual guidelines decisions while the Debt Office is responsible for borrowing and management being conducted within the framework of the guidelines and in accordance with the objective. This decision is based, in part, on the National Debt Office’s proposed guidelines.

A report on the attainment of the objective of central government debt policy is made to the Riksdag in an evaluation communication every other year. The next evaluation will be presented to the Riksdag in April 2020.

Contact

Martin Kling
Press Secretary to Minister for Financial Markets and Consumer Affairs Per Bolund
Phone (switchboard) +46 8 405 10 00
Mobile +46 (0)70-539 57 29
email to Martin Kling, via senior registry clerk
Thomas Nielsen
Deputy Director/Ministry of Finance
Phone 08-405 15 52
email to Thomas Nielsen, via senior registry clerk