Halister News

(Bloomberg) -- The Swedish National Debt Office (NDO) may want to maintain its borrowing presence abroad as the government’s proposal to reduce the Riksbank’s FX reserve otherwise means that FX borrowing will cease, SEB strategists including Johan Javeus write in note.

• Estimate that to keep its foreign market presence at a sufficient level the NDO would need to have about SEK 30-50b in FX borrowing
  • Would entail an equivalent reduction in SEK denominated borrowing, or 5-8% of the outstanding SEK denominated nominal government debt; will make the scarcity of Swedish government bonds even more pronounced going forward
  • Second scenario is if NDO decides to stop borrowing abroad altogether; would not change the outlook for the size of SEK-denominated government debt
  • Third scenario is if NDO is allowed to borrow the FX abroad and place it in U.S. Treasuries, mimicking what the Riksbank has been doing so far; less likely as it will not give any savings on the borrowing costs for Swedish tax payers which was one reason to reduce the FX reserves in the first place
• Earlier: Swedish Riksbank ordered to return foreign currency reserves